The 411 on Money Transmission
Most people think money transmission laws only apply to banks, payment processors, or companies moving billions through the financial system. They’re wrong.
If your product accepts any form of value (cash, crypto, stored value, loyalty points, stablecoins) and sends it somewhere else, even if that “somewhere” is just another person’s digital wallet, you might be a money transmitter. And that label changes everything.
It triggers federal registration, state licensing, background checks, bonding requirements, audits, and yes—real criminal liability if you get it wrong.
The rules weren’t written for the modern internet, but they still apply to it. That’s what makes this topic both confusing and important. Most of the innovation in fintech, crypto, and DeFi lives right on this legal fault line.
So, in two minutes, let’s break down what actually makes a company a “money transmitter,” what FinCEN and the states care about, and how to stay compliant without killing your product before it scales.
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.
About Me
I’m Braeden Anderson — former Big Law attorney and a partner at Gesmer Updegrove LLP. I help fintech and crypto founders navigate regulatory complexity with practical, business-minded solutions. If you’re building something ambitious and want to make sure you’re scaling the right way, reach out. I love helping founders grow.
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
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