State Level MTL Requirements for U.S. Crypto Firms

Table of Contents

  1. Introduction
  2. Federal vs State-Level Money Transmitter Regulations
  3. U.S. state-level money transmitter licensing (MTL)
  4. The Uniform Money Services Act (UMSA)
  5. Defining money transmitters
  6. How to get a money transmitter license in all 50 states 
  7. Nationwide Multistate Licensing System (NMLS)
  8. The Multistate MSB Licensing Agreement (MMLA)
  9. General state licensing requirements
  10. Conclusion


In our previous article, we explored the federal registration requirements for money service businesses (MSBs) who offer cryptocurrency-related services in the United States as “money transmitters”. However,

In this article, we’ll be taking a closer look at the licensing requirements these legally defined money transmitters have to fulfill on a state-by-state basis. 

Federal registration vs State licensing of money transmitters

According to FinCEN’s MSB Registration Rule, money service businesses (essentially most financial institutions, excluding banks) in the U.S. are required to register with FinCEN and renew their registrations every 2 years. 

Most cryptocurrency-dealing businesses in the U.S. fall under the MSB category of “money transmitter”, as defined by the Bank Secrecy Act (BSA). 

Not only do these money transmitters have to comply with federal registration, they also need to meet licensing requirements in each U.S. state that they’re looking to operate in. This is often easier said than done. Many U.S. states, Wyoming with its recent plethora of progressive blockchain laws being the exception, still view crypto businesses with a healthy dose of skepticism, buoyed by a lack of technical understanding and bad press,  and try to regulate them into the ground. 

While registering as an MSB money transmitter with FinCEN is a quick and painless online procedure, getting your money transmitter licensing (MTL) in your states of operation is a more costly process. 

Among other things, it requires you to understand state requirements at an expert level and establish a strong AML compliance policy. Your company will require professional legal and financial expertise (apply here for a free consultation with Kelman Law)

Why is this licensing procedure so complex then? Well, we can think of 49 reasons.

U.S. state-level money transmitter licensing (MTL)

State licensing adds a complexity to operating a crypto business that doubles as an effective barrier to entry for companies that are not well-funded or prepared. To operate as a money transmitter in a state, a cryptocurrency business like a virtual currency exchange will need to meet the same licensing and regulatory requirements as traditional financial institutions.

Unfortunately, and not surprisingly for any company familiar with U.S.state licensing, there is no one-size-fits-all money transmitter license available to operate across the United States. 

Instead, each state has its own money transmitter laws and requirements. Money transmitter licensing therefore varies greatly in complexity, cost and duration depending on which and how many states you’re targeting, and the type of MTL you’re applying for.

The legal definition of money service businesses and money transmission have historically varied significantly across the U.S., due to different legal interpretations by state laws. This has resulted in some MSBs exploiting legislative loopholes to launder money and conduct other financial crimes. 

The Uniform Money Services Act

In order to codify MSBs’ regulations,mitigate money laundering and terrorism funding risks and separate them from tightly-regulated banks to foster their development, state regulators adopted the Uniform Money Services Act (UMSA), in 2000, and revised it in 2004. 

UMSA helped define “money transmission” as “selling or issuing payment instruments, stored value, or receiving money or monetary value for transmission.”… where “‘monetary value’ means a medium of exchange, whether or not redeemable in money.”

Many U.S. states have since used the UMSA definition of money transmission to target money transmitters in their jurisdiction, creating a level of regulatory consistency at state-level legislation.

What is a “money transmitter” in U.S. law? 

Thanks to UMSA, today we can generally define a money transmitter in the States as follows: 

 A money transmitter is a person or business that transmits funds in the U.S. or overseas on behalf of a a third party, ie. receiving assets with monetary value and then transmitting it elsewhere. 

The Code of Federal Regulations defines a money transmitter as:

A person that provides money transmission services. The term “money transmission services” means the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.

According to the BSA The money transmission must be conducted as a business activity and exceed $1,000 per transaction or a series of transactions per day. Examples of transactions include check cashing, money orders, currency exchanging( including virtual currency like Bitcoin), travelers checks and money transfers.

If you tick these boxes in your business activities, you most likely need a money transmitter license in every state you’re operating in.

How to get a money transmitter license in all 50 states 

Short answer: There isn’t a short answer. To be granted licenses in all 50 states (49 really as Montana doesn’t require a license), will be a long process currently for any U.S. money transmitter. 

As a crypto-related money transmitter, you will need to comply with AML compliance and customer due diligence requirements and may be subject to the following:

  • Surety bond of between $1,000 to $500,000
  • License fee of up to $3,750 per state
  • Application fee of up to $5,000 per state
  • Minimum net worth of $5,000 to $2,000,000

For example, while you’ll  only need a minimum net worth and surety bond of $1,000 to apply in Hawaii, you’ll need to be worth at least $100,000 and have a surety bond of $500,000 to be considered for a state license in Michigan.

Currently, only Montana (and South Carolina up until 2018) does not require money transmitters to be licensed. Being granted a money transmitter license in New York is currently likely the most difficult, as well-known exchange Bittrex’ rejected NYDFS application has demonstrated. Recent New York licensing reforms are encouraging though.  

Some states like Kansas, Colorado and Texas have made certain MTL concessions for virtual currency businesses, while Wyoming has been lauded for its progressive blockchain legislation that aims to make it the Delaware of the crypto industry. 

Wyoming’s Senate and House of Representatives have enacted 13 blockchain laws in the last 2 years. For the purposes of this article, most notable are the 2018 bills to relax money transmission legislation for ICO-issued tokens and exempt virtual currencies from the Wyoming Money Transmitter Act.

Let’s take a look at regulatory advances in recent years that are helping MSB and money transmitter state licensing converge across the States.

What is the Nationwide Multistate Licensing System (NMLS)?

The Nationwide Multistate Licensing System (NMLS) is a government website that acts as a centralized database,  where most states require their money transmitters to upload their license and reporting. This information can be accessed by the public to verify the claimed bona fides of a company. 

What is the Multi-State MSB Licensing Agreement (MMLA) Program?

The Multi-State MSB Licensing Agreement Program (MMLA Program) is a welcome boon for money transmitters looking to apply for 5 or more state licenses over the next 12 months. 

The MMLA program is a state regulatory initiative that seeks to improve, simplify and expedite the MSB licensing process for companies looking to legally operate in multiple U.S. states. Some of the pain points the MMLA targets are legal and procedural requirements, lengthy application times and lack of resources. 

The MMLA is a two-phase program, executed over 3 steps,  that first reviews general license application information (Phase One) and then state-specific license application information (Phase Two). 

What are the MMLA’s 3 steps? 

Step 1: A Phase One state agency will conduct a Phase One review of a money transmitter’s application. If successful, the state agency will certify its review to other state agencies that the applicant has fulfilled all the necessary Phase One requirements.

Step 2: Phase Two- Once each partaking state agency has received an application, they will perform a Phase Two Review of the licensing request based on their specific state regulations. 

Step 3: If an applicant’s Phase Two Review also passes its test, each state agency may approve a money transmitter license.

Currently, Washington Department of Financial Institutions is the lead state for the MMLA Program. Interested parties can apply here or contact for more information. 

General MTL state licensing requirements

How to navigate this complexity then? Well, in general, there are some commonalities between states’ licensing requirements of money transmitters. While each state may demand different paperwork, you can expect at a minimum to be asked to complete these tasks prior to sending in your licensing application:

  1. A license application form
  2. Financial statements 
  3. Business plan(s)
  4. AML compliance program
  5. Surety bond or other form of security
  6. Background check 
  7. License fees
  8. Minimum net worth threshold

We’ll be discussing these requirements in detail in Part III of our series on U.S. Money Transmitter Licensing for crypto firms. 


The United States have pioneered many blockchain regulations over the years, and the country continues to influence crypto asset regulation on a global scale thanks to the Financial Action Task Force (FATF)’s adoption of the BSA rule 31 “Travel Rule” in its pivotal Recommendation 16 update for virtual asset service providers (VASPs). 

However, the sheer complexity of U.S. state legislation, coupled with confusing federal regulatory oversight, has made the country a daunting destination for nearly all virtual currency-dealing companies, who must contend with vastly different licensing requirements and costs that only the biggest and most well-funded businesses can afford. The U.S. is also perceived to be falling behind when it comes to effectively regulating new virtual asset innovations such as DeFi, stablecoins and central bank digital currencies

Therefore, regulatory innovations like the MMLA program and the Crypto-Currency Act of 2020 draft proposal will hopefully help to eventually streamline a clear federal licensing framework (such as those recently established in the Payment Services Acts of Singapore and Japan) that can be adopted at state-level as well. 

Until then though, crypto firms on a budget who are looking to do business in the U.S. would be well-advised to have a clear plan of action where they want to operate, and familiarize themselves with at least a broad understanding of their regulatory obligations. 

Gaining the right legal expertise will save your crypto money transmitter a lot of money, time and resources in the long run. Therefore, get in touch with us at Kelman.Law. If we think your case has merit, we’ll schedule you for a free 30-min consultation and give you an exact breakdown and expectation of what’s needed to get you up and running across the U.S. states of your choice. 


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