Money Transmitter Licenses 101

If your product accepts value from one person and moves it to another person or location, you may be a money transmitter. That status triggers federal MSB registration and, in most states, a money transmitter license.

Federal Framework

1.     At the federal level, FinCEN administers the Bank Secrecy Act. A money transmitter is any person providing money transmission services, defined as accepting currency, funds, or other value that substitutes for currency, and transmitting it by any means. Banks and firms already regulated by the SEC or CFTC are excluded.

2.     MSBs must register with FinCEN on Form 107 within 180 days of starting up, renew every 24 months, and maintain an agent list that is updated annually. Civil penalties can run at least 5,000 dollars per violation, and criminal exposure exists for failing to register.

3.     OFAC sanctions rules also apply to money transmitters, and consumer issues can involve the CFPB and the FTC. Criminal liability for unlicensed money transmitting is addressed in 18 U.S.C. § 1960.

State Licensing
Federal registration is not a state license. Nearly every state requires its own money transmitter license with surety bonds, background checks, fingerprints, financial statements, and minimum net worth. To reduce duplication, many states use the CSBS Multistate MSB Licensing Agreement. It does not replace licenses, but it allows states to rely on a lead review for common elements.

Crypto

1.     If you exchange or transmit convertible virtual currency, FinCEN treats you as a money transmitter based on existing rules. Registration, an AML program, recordkeeping, and reporting all apply. The definition covers value that substitutes for currency, and it does not require the same form of value in and out.

2.     Decentralization complicates money-transmitter regulation because it removes the identifiable middleman. In systems like Uniswap, users transact directly through smart contracts, without a company accepting or sending funds on their behalf. Since the law defines money transmission as accepting and transmitting value for another person, it’s unclear who, if anyone, is the “transmitter.” The result is a legal gray area where traditional rules designed for intermediaries don’t neatly apply to autonomous, code-based protocols.

Practical Checklist
Begin by mapping your business model and fund flows against the federal definition of money transmission to determine whether your activities fall within scope. If they do, register with FinCEN within the required timeframe and maintain accurate, up-to-date records, including any mandated agent lists. Evaluate state licensing obligations, pursuing licenses in each jurisdiction where required, or leveraging multistate coordination programs when available. Finally, implement and maintain a comprehensive BSA/AML compliance program, including written policies, internal controls, and reporting procedures. If your business also involves digital assets or emerging payment technologies, take additional care to assess how those activities fit within both federal and state money-transmission frameworks.

Contact me if you have questions or need assistance.

Sources: FinCEN and eCFR: definitions and scope, 31 C.F.R. § 1010.100(ff); registration and renewals, 31 C.F.R. § 1022.380 and FinCEN Form 107; CVC guidance FIN-2019-G001; Montana regulator page; CSBS MMLA materials