Money Transmitter Licensing Law

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Each state separately licenses and regulates money transmitters that engage in money transmission to their residents. Certain states participate in the Nationwide Multistate Licensing System (NMLS) portal through which a uniform money transmission application may be filed.

Background on Licensed Cryptocurrency Exchanges

Cryptocurrency exchanges in the United States must comply with expensive multi-state money transmitter licensing requirements, and must have anti-money laundering compliance programs in place. Cryptocurrency exchanges in the United States that provide custodial cryptocurrency accounts include Bittrex (based in Seattle), Circle (based in New York City), Coinbase (based in San Francisco), Gemini (based in New York City), itBit (based in New York City), Kraken (based in San Francisco), and Poloniex (based in Boston). Shapeshift (based in Denver) permits users to trade one cryptocurrency for another from the customer's own non-custodial cryptocurrency wallet.

Each State Has Its Own Money Transmitter Licensing Requirements

Currently, in most states, a cryptocurrency exchange is deemed to be a money transmitter that is subject to the same state licensing and regulation requirements as other money transmitters. In certain states (such as Colorado, Kansas, Pennsylvania and Texas), businesses engaging in certain types of cryptocurrency sales are exempt from state licensing requirements. Montana is currently the sole state that has no licensing requirements for money transmitters.

Most states require money transmitters to submit to their money transmitter licensing and reporting through an account on the NMLS website. A summary of the state licensing procedures and requirements for the states that have adopted the NMLS system for money transmitter licensing is set forth here. The NMLS web site permits public access at nmlsconsumeraccesss.org. to the state license information of money transmitters. The NMLS website includes public information about the licensing of such cryptocurrency exchanges as Bittrex, Circle, Coinbase, Gemini, and Poloniex.

A cryptocurrency exchange that desires to be licensed in all 50 states is subject to the following expensive licensing requirements: (i) minimum surety bond requirements that range from $1,000 to $500,000 per state, (ii) application fees that range from $0 to $5,000 per state, (iii) licensing fees that range from $0 to $3,750 per state, and (iv) minimum net worth requirements that range from $5,000 to $2,000,000. In addition, a money transmitter is required to comply with the financial disclosure and consumer compliance requirements of each state in which it does business.

New York currently has the most onerous money transmitter licensing and compliance requirements for a cryptocurrency exchange. On April 10, 2019, the New York Department of Financial Services rejected the money transmitter license application of Bittrex, a cryptocurrency exchange with a headquarters in Seattle. Bittrex subsequently issued a statement that disputed some of the assertions made in the NYDFS rejection letter.

Proposed Uniform Virtual Currency Businesses Act

On October 9, 2017 Uniform Law Commission — a non-profit entity that consists of approximately 350 commissioners appointed by all 50 states and the District of Columbia — published a proposed "Uniform Regulation of Virtual Currency Businesses Act." On February 6, 2018, the American Bar Association announced its endorsement of the uniform act. Information about the status of state adoption of the uniform act proposed by the Uniform Law Commission is set forth on this website.

New York Limited Purpose Trust Companies

The New York State Department of Financial Services currently permits the formation of New York limited purpose trust companies to engage in cryptocurrency exchange, escrow and custody services. This type of trust company charter provides the advantages of (i) being exempt from the money transmission licensing requirements of a significant number of states in the United States, (ii) being able to conduct a broad range of custody and fiduciary services related to cryptocurrency assets, and (iii) providing reassurance to customers that data security, operations and personnel are subject to bank-grade supervisory and examination standards. This trust company charter has the disadvantages of having higher minimum capital requirements and a significantly higher level of compliance costs related to more stringent regulatory oversight and examination.

Two limited purpose trust companies that engage in the virtual currency business have been chartered: Gemini Trust Company, LLC and itBit Trust Company, LLC.

On September 10, 2018, the New York State Department of Financial Institutions approved two New York limited purpose trust companies to sell ethereum-based ERC-20 tokens that have a pegged value of $1.00 per token and are fully collateralized by FDIC-insured deposits.

State Money Transmitter Licensing Authorities

Set forth below is a list of the money transmitter licensing authorities of each state and the District of Columbia, along with links to their web sites.

State State Money Transmitter Licensing Authority
Alabama Alabama Securities Commission
Alaska Alaska Division of Banking and Securities
Arizona Arizona Department of Financial Institutions
Arkansas Arkansas Securities Department
California California Department of Business Oversight
Colorado Colorado Division of Banking
Connecticut Connecticut Department of Banking
Delaware Delaware Office of the State Bank Commissioner
District of Columbia District of Columbia Department of Insurance, Securities and Banking
Florida Florida Office of Financial Regulation
Georgia Georgia Department of Banking and Finance
Hawaii Hawaii Department of Commerce and Consumer Affairs
Idaho Idaho Department of Finance
Illinois Illinois Department of Financial & Professional Regulation
Indiana Indiana Department of Financial Institutions
Iowa Iowa Division of Banking
Kansas Kansas Office of the State Bank Commissioner
Kentucky Kentucky Department of Financial Institutions
Louisiana Louisiana Office of Financial Institutions
Maine Maine Office of Consumer Credit Protection
Maryland Maryland Department of Labor, Licensing & Regulation
Massachusetts Massachusetts Office of Consumer Affairs and Business Regulation
Michigan Michigan Department of Insurance and Financial Services
Minnesota Minnesota Department of Commerce
Mississippi Mississippi Department of Banking and Consumer Finance
MIssouri MIssouri Division of Finance
Montana Montana Division of Banking & Financial Institutions
Nebraska Nebraska Department of Banking and Finance
Nevada Nevada Department of Business & Industry
New Hampshire New Hampshire Banking Department
New Jersey New Jersey Department of Banking & Finance
New Mexico New Mexico Regulation and Licensing Department
New York New York Department of Financial Services
North Carolina North Carolina Commissioner of Banks
North Dakota North Dakota Department of Financial Institutions
Ohio Ohio Department of Commerce
Oklahoma Oklahoma Banking Department
Oregon Oregon Division of Financial Regulation
Pennsylvania Pennsyvlania Department of Banking and Securities
Rhode Island Rhode Island Department of Business Regulation
South Carolina South Carolina Attorney General
South Dakota South Dakota Division of Banking
Tennessee Tennessee Department of Financial Institutions
Texas Texas Department of Banking
Utah Utah Department of Financial Institutions
Vermont Vermont Department of Financial Regulation
Virginia Virginia State Corporation Commission
Washington Washington State Department of Financial Institutions
West Virgnia West Virginia Division of Financial Institutions
Wisconsin Wisconsin Department of Financial Institutions
Wyoming Wyoming Division of Banking

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