Fintech startups and cryptocurrency companies in the U.S. often need a Money Transmitter License (MTL) to operate legally. This detailed guide is organized as a Q&A, answering common questions about MTLs, coveri.g what they are, why they’re needed, how to obtain them across different states, costs and timelines, and special considerations for digital asset businesses. The focus is nationwide, highlighting general requirements (with notes on state variations) for any company seeking an MTL.
For tailored support on navigating the licensing process, explore our free MTL assessment tool.1
What is a Money Transmitter License (MTL)?
A Money Transmitter License (MTL) is a regulatory authorization required for businesses that transfer money or handle financial transactions on behalf of others. In simple terms, an MTL is needed when your business accepts funds from one person and transmits or moves them to another. This applies to activities like sending payments, facilitating electronic transfers, operating digital wallets, or exchanging currencies (including cryptocurrencies). The license is designed to ensure such businesses comply with financial laws, including anti-money laundering (AML) and know-your-customer (KYC) regulations.
In the United States, MTLs are issued at the state level. There is no single federal “money transmitter license.” Each state has its own licensing requirements, so a company operating in multiple states generally must obtain an MTL in each of those states. (Montana is the one notable exception that currently does not require a money transmitter license for doing business there.) On the federal side, companies engaging in money transmission must register with the Financial Crimes Enforcement Network (FinCEN) as a Money Services Business (MSB), but this is a registration rather than a license. FinCEN registration is mandatory for MSBs to cover federal AML oversight, yet it does not replace or preempt state licensing requirements. In summary, an MTL is the state-issued permit to transmit money, and obtaining it (along with FinCEN registration) is a fundamental legal step for payment and crypto companies in the U.S.
Why do Fintech and Crypto companies need a Money Transmitter License?
Obtaining a money transmitter license is critical for several reasons:
Legal Compliance: Operating without the proper license can lead to severe consequences. Businesses transmitting money without an MTL risk significant fines, cease-and-desist orders, or even criminal charges. In fact, under U.S. federal law, running an unlicensed money transmitting business is a felony (18 U.S.C. § 1960). Getting licensed keeps your company on the right side of the law and prevents shutdowns due to non-compliance.
Access to Banking and Partners: Banks and payment processors often require an MTL before they’ll work with you. Having the license demonstrates to financial institutions and other partners that your fintech or crypto business is legitimate and compliant. This opens doors to critical services like maintaining bank accounts, integrating payment gateways, or forming partnerships that can help expand your product’s reach.
Credibility and Customer Trust: Being properly licensed builds credibility with customers, investors, and regulators. It shows that your company takes regulatory responsibilities seriously and has met the high standards set by authorities. This credibility can be a competitive advantage, reassuring users that their funds are handled in a regulated and safe manner.
National Expansion and Growth: If you plan to operate across multiple states or nationwide, licensing is essential for scaling up. You will need to obtain MTLs in the vast majority of states to serve customers there. Companies that incorporate licensing into their growth strategy early can avoid costly delays, for example, by securing licenses in key markets ahead of expansion. Essentially, the MTL is a gatekeeper for entering new markets in the U.S. financial landscape.
In short, an MTL isn’t just a legal box to check; it’s fundamental to operating a compliant fintech or crypto business, maintaining access to financial networks, and enabling future growth.
Who is required to obtain a Money Transmitter License?
Any business that transmits money or monetary value on behalf of others will likely need a money transmitter license. This covers a wide range of fintech and crypto business models. Common examples include:
- Remittance or money transfer services – companies that send money from one person to another (domestically or internationally).
- Cryptocurrency exchanges and wallet providers – platforms that allow users to buy, sell, or hold crypto assets (since they are handling transfers of value between parties).
- Mobile payment and P2P payment apps – for instance, services that let individuals send money to others via a mobile app.
- Bill payment services – companies that take payment from a customer and forward it to a biller (utility payments, etc.).
- Currency exchange services – businesses exchanging one currency for another (including digital currencies for fiat).
- Prepaid card issuers and stored-value card providers – issuing or managing prepaid debit cards or similar stored-value instruments.
- Marketplace or crowdfunding platforms that handle customer funds – for example, an online marketplace that holds money from buyers in escrow for sellers, or crowdfunding sites that intermediate payments.
- Payroll and payment processing services – if a company handles payroll disbursements or processes payments on behalf of other businesses or individuals.
In essence, if your company accepts funds from users and then moves, transfers, or holds those funds for delivery to another party, you are likely engaging in money transmission and need to be licensed. It’s worth noting that the exact statutory definition of “money transmission” varies by state, but it typically encompasses the activities listed above in one form or another. When in doubt, consult the specific language of each state’s law or seek legal counsel to see if your business model triggers the licensing requirement.
Are any businesses exempt from money transmitter licensing?
Yes, certain businesses or activities can be exempt, but these exemptions are limited and vary widely by state. Some common exemptions and special cases include:
Banks and credit unions: These are generally exempt from state money transmitter licensing because they are regulated under separate banking laws. A bank doesn’t need an MTL to transmit money, as it already has a bank charter (though a non-bank fintech partner of a bank would still need licensing).
Agent of the payee exemptions: In some states, if you are acting as an agent of the recipient (payee), for example, a payment processor that is contractually an agent of a merchant to receive payments on their behalf, you might not require a license. However, this exemption is very specific and the legal conditions for it differ by jurisdiction. Misapplying the agent-of-payee concept is a common mistake, so it should be confirmed with legal analysis in each state.
Merchant payment processing (limited scenarios): If a service solely provides payment processing for goods or services (and doesn’t hold funds beyond facilitating a direct payment to a merchant), some states may not consider that money transmission. The classic example is a processor that immediately clears funds to the merchant and does not maintain a customer wallet or account. Again, this depends on state law nuances.
Government entities or certain payment instruments: Government bodies are usually exempt. Also, some states exclude certain instruments (for instance, closed-loop gift cards or certain rewards program points might not be considered “money” for licensing purposes).
Other regulated financial services: Entities like securities broker-dealers, insurance companies, or collection agencies might have separate licenses and exemptions when performing activities within their regulated scope.
Importantly, each state defines these exemptions differently. For example, one state might exempt an “agent of the payee” explicitly in its statutes, while another state might not recognize that exemption at all. Always review the specific money transmitter act in each state where you plan to operate and consult with compliance experts or attorneys to determine if an exemption applies to your business model. Even if one part of your service seems exempt in a state, other aspects might still trigger licensing. When in doubt, it’s safer to assume you need the license or get a formal opinion from the state regulator.
Do cryptocurrency companies need a Money Transmitter License?
Yes. In most cases, cryptocurrency companies (such as exchanges, digital wallet providers, or crypto payment services) are treated as money transmitters under state laws and therefore do need money transmitter licenses. Regulators generally consider convertible cryptocurrencies and stablecoins as “monetary value” that falls under money transmission rules. If your business involves transferring cryptocurrency from one person to another, or holding crypto on behalf of customers, that activity is seen as transmitting value similar to fiat currency transmission. As a result, many crypto businesses are required to obtain MTLs, just like traditional money services.
However, there are some crypto-specific considerations and variations by state. Over the past several years, numerous states have updated their statutes or guidance to explicitly include virtual currency in the definition of money transmission. For example:
New York: Operating a crypto business in New York requires a special license called the BitLicense (for virtual currency activities) in addition to the standard New York MTL for fiat money transmission. In practice, a crypto exchange in NY needs both licenses from the NY Department of Financial Services. New York’s regime is one of the strictest, and the BitLicense involves its own application process and requirements separate from the MTL.
Other states with specific crypto guidance: States like California, Texas, Louisiana, Wyoming, and others have issued guidance or amended laws regarding virtual currencies. Many of these states now explicitly include crypto in their MTL requirements or have clarified the scope. For instance, California treats many crypto activities as money transmission and has been working on updating its regulations, while Texas historically interpreted its law such that some pure crypto-to-crypto transactions might not need a license, but Texas has modernized its laws (adopting the Uniform Money Transmission Modernization Act in 2023) to more closely regulate digital assets. Wyoming is known for being friendly to crypto and has exempted certain crypto transactions from its money transmitter act (and even offers special crypto-specific charters), but Wyoming is an outlier. The vast majority of states will require a crypto business to obtain an MTL.
Activities that trigger licensing: Even if your platform doesn’t handle traditional fiat currency, activities like exchanging one cryptocurrency for another, facilitating peer-to-peer crypto transfers, or issuing a stablecoin can trigger state licensing requirements. For example, if you hold customers’ crypto private keys (custodial wallet service) and can move crypto on their behalf, you are likely viewed as a money transmitter of virtual currency. Safeguarding or transmitting crypto assets on behalf of others is generally treated as money transmission in the eyes of regulators.
The key takeaway is that crypto businesses are not off the hook for licensing. You should carefully review each target state’s stance on virtual currency. As of 2025, most states regulate crypto under their money transmitter laws either explicitly or implicitly, with only very narrow exceptions. Always verify with the state regulator or legal counsel. Getting an MTL (and any additional crypto-specific license like New York’s BitLicense) is an essential compliance step for a crypto startup operating in the U.S.
Do you need a separate Money Transmitter License in each state, or is there a national license?
You generally must obtain a separate MTL for each state in which you plan to operate (offer your services). There is no single “nationwide” money transmitter license that covers all 50 states. As noted, 49 of 50 states (plus D.C.) require money transmitters to be state-licensed, with the lone exception currently being Montana, which does not have a money transmitter licensing requirement. So if you want to operate nationwide, you’d be looking at nearly 50 different state licenses (Montana can be skipped for MTL, though you’d still follow any other applicable rules there).
Here are some key points on multi-state licensing:
Federal registration vs. state licenses: All money transmitters must register federally with FinCEN as an MSB, but this is not a license to operate; it’s simply a compliance registration for anti-money-laundering purposes. FinCEN registration does not allow you to bypass state licenses. You need both: the FinCEN MSB registration and each required state license.
State-by-state variation: Each state has its own agency and set of requirements for money transmitter licensing. While there are many similarities (most require background checks, surety bonds, compliance programs, etc.), the fees, required net worth, bond amounts, application paperwork, and approval timelines differ in each state. For example, New York requires a minimum $500,000 surety bond (and if doing crypto, the separate BitLicense), California often requires around $500,000 in minimum net worth plus extensive documentation, and Texas may conduct pre-application meetings and a deep review of financials. Navigating these differences is one of the biggest challenges in multi-state licensing.
Nationwide Multistate Licensing System (NMLS): The good news is that most states allow you to apply for and manage the MTL through a centralized portal called the NMLS (Nationwide Multistate Licensing System). NMLS streamlines the process by providing a single online interface to submit applications, financial statements, background check authorizations, and other materials to multiple states. Most states use NMLS for MTL applications, but note that a few states (such as Florida and New Jersey) still require you to apply directly with their state regulator outside of NMLS. Even with NMLS, you’ll still have state-specific requirements to meet, but it reduces duplicate data entry and helps coordinate some steps.
Multi-state coordination and reciprocity: In recent years, state regulators (through the Conference of State Bank Supervisors, CSBS) have made efforts to harmonize and simplify multi-state licensing. One initiative is the Multi-State MSB Licensing Agreement (MMLA) program. Under the MMLA, an applicant company can undergo a “one company, one exam” review: one lead state conducts a thorough examination of the business (covering ownership, business plan, financial condition, AML program, etc.), and then other participating states accept that review and focus only on their state-specific issues (like local surety bond and fee requirements). This eliminates redundant full reviews in every state, potentially reducing approval times and compliance costs for multi-state licensing. As of 2025, over 30 states participate in some form of coordinated review or reciprocal acceptance of exam results under this networked supervision framework. Important: This doesn’t mean you get to skip applying to those states, you still must apply in each state, but the process is streamlined because one state’s exam can satisfy others.
In summary, if you operate in 10 states, expect to secure 10 licenses (via NMLS or otherwise) and comply with 10 sets of renewal and reporting obligations. There is no federal “umbrella” license you can get to cover everything. Plan your licensing strategy around the markets that matter most to you, and consider a phased approach (for example, get a handful of state licenses first, then gradually expand) so that you can manage the burden. Always keep track of each state’s requirements and deadlines individually even as you leverage tools like NMLS to help manage them centrally.
What are the steps to obtain a Money Transmitter License?
Obtaining a Money Transmitter License involves navigating several key steps. At a high level, the process can be broken down as follows:
1. Determine if you need the license: First, confirm that your business activities indeed require licensing (most do if you’re moving money for others). Review federal and state definitions of money transmission to ensure you fall in scope. If there’s any uncertainty or a potential exemption, clarify that now, because if you don’t actually need a license in a particular state, you could save time and resources. Most fintech or crypto transaction businesses will need the license in each state, as discussed above.
2. Register with FinCEN as an MSB: Before applying for any state license, you must register with FinCEN at the federal level. This is done by filing FinCEN Form 107 (MSB Registration) through the BSA e-filing system. FinCEN registration should be completed within 180 days of starting your money services business, and then renewed every 2 years. In addition, you need to implement an AML compliance program that meets federal requirements (for example, appoint a compliance officer, have written policies for customer due diligence, suspicious activity monitoring, reporting, and similar obligations). Having your FinCEN MSB registration and a robust AML/KYC program in place is a prerequisite; many state applications will ask for your FinCEN registration details and copies of your AML policies.
3. Gather required documentation: Applying for an MTL is document-intensive. You will need to prepare a comprehensive application package for each state. Common documentation and requirements include:
- A detailed Business Plan describing your company’s services, target market, operational model, and how you will conduct money transmission.
- Financial statements (often audited statements or at least reviewed statements for startups), and possibly projections. States want to see that you are financially sound.
- Surety bond (or another form of permissible security) as required by the state (see next step).
- Background checks for key individuals: Owners, directors, executives will typically need to provide fingerprints and undergo criminal background checks. You’ll also disclose personal financial statements or credit reports for these persons in many cases.
- Compliance program documents: This includes your AML/KYC policies and procedures, anti-fraud measures, information security policies, and similar materials. Many states ask for an AML compliance manual or a summary of your program to ensure you can prevent money laundering.
- Flow of funds diagrams: Diagrams or descriptions of how money moves through your system, from the customer to the endpoint, including any intermediary banks or partners. Regulators use this to understand what exactly you’re doing with customer funds.
- Organizational charts and management info: States want to see the corporate structure (parent company or affiliates, if any) and the management hierarchy. You’ll disclose all owners above a certain percentage and controlling persons.
- Other state-specific forms: Each state might have a few unique forms, such as an “Affidavit of Executive Officer,” or questions about your cybersecurity, or a questionnaire about permissible investments. The NMLS system will list state-specific requirements in a checklist for each state.
It’s crucial to fill out all forms accurately and completely. Even a small error or omission can delay your application. Regulators might send you a deficiency notice for missing information, which slows things down.
4. Obtain the required surety bonds (and meet net worth requirements): Virtually every state will require a surety bond as a condition of licensing. A surety bond is like an insurance policy that you purchase to guarantee your obligations; it protects consumers (and the state) in case your company fails to meet its financial responsibilities (for example, if you fail to transmit someone’s money, the bond can be used to compensate). The bond amount varies by state and is often tied to your transaction volume or business model. Typical bond requirements range from around $50,000 up to $500,000 for many states, but some states have higher maximums or scaling formulas (even into the millions for very large volume transmitters). For instance, a smaller state might require a $50k bond, whereas New York requires a minimum $500k bond, and a few states can require $1 million or more if your volume is high. You usually don’t have to put up the full amount in cash; instead you pay a bond premium (often 1–5% of the amount annually) to a surety company, which issues the bond. In addition to bonds, be aware of net worth (capital) requirements; many states require that your company maintain a minimum net worth or tangible equity (for example, $100k, $500k, sometimes more). You’ll need to show financial statements that prove you meet those thresholds. Ensure you secure the bond and have proof (bond certificate) ready for each state application.
5. Submit state license applications (usually via NMLS): With all your documents ready and bonds in hand, you will submit the actual applications. For most states this means creating an application in the NMLS online portal. You’ll choose the states you want and complete the unified NMLS form (which covers general info about your business) plus upload state-specific requirements. You will also pay the application fees for each state at this point. Application fees range widely – roughly from a few hundred dollars in some states to over $1,000 in others (and New York is even higher). NMLS helps streamline the process, but remember to double-check each state’s checklist; some states might require you to mail in a wet-signed form or have a notarized document outside of NMLS. A handful of states (like Florida and New Jersey) don’t use NMLS for MTLs and require direct paper or electronic filings to their regulators, so for those you’ll submit materials directly.
6. Respond to regulator inquiries and undergo review: After submission, each state’s regulator (often the Banking Department or Financial Services Department) will review your application. They might reach out with questions or requests for additional information. For example, they could ask you to clarify a part of your business plan, or provide more details on a compliance procedure, or they may flag an issue in a background check that needs explanation. It’s important to respond promptly and thoroughly to any such inquiries. Delays in your responses can slow down the approval. Some states might schedule a phone call or an interview as part of their review, or an on-site visit (though that’s more common post-licensing). Timelines for approval can vary, but expect anywhere from a few weeks (best case) to several months for a state to approve an MTL.
7. License issuance: If all goes well, the state will issue your Money Transmitter License (often in the form of an official certificate or license number). At that point, you are legally allowed to start offering transmission services in that state. Keep in mind the license may come with specific conditions or limitations (occasionally a state might issue a license with a special condition, like requiring an increased bond if your volume grows, though this is somewhat rare).
8. Maintain and renew (ongoing): Once licensed, you must maintain compliance and renew your license annually in most states. Missing a renewal deadline can result in expiration of your license, so it’s important to stay on top of this.
Each of these steps requires careful attention. Many companies choose to hire specialized compliance consultants or attorneys to help prepare multi-state MTL applications due to the complexity and the importance of getting it right the first time. Whether you handle it internally or get professional help, be organized: create a checklist for each state, and perhaps start with a smaller set of states first to learn the process before tackling dozens at once. It’s a marathon, not a sprint, but with preparation, you can methodically get through the licensing journey.
How much does it cost to get a Money Transmitter License?
Obtaining MTLs can be expensive, and the costs will accumulate across multiple states. Here are the major cost components to consider:
State Application and Licensing Fees: Each state charges non-refundable fees when you apply for a license (and often smaller fees for annual renewal). These application fees typically range from around $375 on the low end up to $5,000 or more in some states. Many states are in the lower thousands or hundreds; a few, like New York, have higher fees. For example, a state might have a $500 application fee plus a $1,000 license fee. If you plan to license in, say, 40 states, and the average fee is around $1,000, that’s $40k in fees right there.
Surety Bond Costs: As discussed, you must obtain surety bonds which have a face value mandated by each state (for example, $50k, $100k, $250k, and so on, potentially adding up to several million if you add all states together). You do not pay the full bond amount up front, but you will pay a premium to a surety company for the bond issuance. The premium is typically a percentage of the bond amount (could be about 1–3% for a well-qualified applicant, higher if your finances are weaker). For instance, a $100k bond might cost around $1,000–$3,000 per year in premium. Some sureties may require collateral for a startup company (like a cash-secured bond) especially if the bond amounts are large. Additionally, simply meeting the bond requirements implies you need sufficient capital backing. Bond amounts across states can vary from $10,000 up to several million dollars, with most common requirements in the low six figures. The larger your business volume, the higher the bond amounts you’ll face in many states.
Net Worth / Capital Requirements: Many states require that a licensee maintain a minimum net worth or capital amount. This isn’t a fee you pay, but you must have this much equity in your company. The required net worth can range from as low as around $5,000 for very small states up to $1–2 million for others. For example, a state might say “applicants must have a tangible net worth of at least $100,000,” meaning your assets minus liabilities should be equal to or greater than $100k. Meeting these thresholds might require the owners to inject more capital into the company. It’s effectively a cost in the sense that you need to allocate funds to the business to satisfy regulators.
Legal and Professional Fees: If you use attorneys or compliance consultants to prepare applications, those services can be costly (tens of thousands of dollars for a full multi-state project is not uncommon). Even if handled in-house, factor in the staff time and resources devoted to licensing.
Compliance Program Costs: Developing and implementing an effective AML/KYC program has costs, such as purchasing verification software, training staff, perhaps hiring a compliance officer or outsourcing parts of compliance. Some states might require an initial on-site examination after licensing (at your expense) or audited financial statements annually, which add to ongoing costs.
Audit and Reporting Costs: Keeping compliant means you may need periodic independent reviews, especially if a state law requires a yearly audited financial statement by a CPA or certain IT/security audits. These are ongoing costs, but worth noting as part of the overall financial picture.
In summary, for a single state, you might spend a few thousand dollars upfront (fees plus bond premium). For multi-state (nationwide) licensing, the costs add up quickly into the hundreds of thousands when you sum all state fees, bonds, and professional expenses. As one example, a comprehensive estimate noted that to get licensed in all states, one might face up to about $500k in total bond commitments (not paid fully, but coverage) and substantial fees per state. Planning and budgeting for these expenses is essential. It’s wise to prioritize which state licenses you need first so you can spread out the cost over time, rather than tackling all states at once unless you have significant funding. Also, consider that these are not one-time costs; bonds renew annually (with premiums), and licenses have renewal fees each year.
How long does it take to obtain a Money Transmitter License?
Getting a money transmitter license is not an overnight process. The timeline can range from a few months to over a year, depending on the state and how prepared your application is. Key points on timing:
Typical Approval Times: In general, expect a range of about 3 to 12 months to get an MTL approved per state, assuming all paperwork is in order. Some states are known for quicker turnarounds (for example, states with efficient regulators might approve in 2–3 months if everything is complete). Other states take much longer.
States with Longer Timelines: Heavily regulated states or those with high application volumes can take more time. California and New York are two examples where, in recent years, the average licensing timeline has been on the higher end, often 6 to 12 or more months for approval. Post-COVID backlogs and heightened scrutiny in 2024–2025 have pushed some of these timelines out even further, occasionally approaching or exceeding a year for the largest states. Texas can also be lengthy, particularly if they have a lot of follow-up questions or require a meeting. Plan accordingly if these are critical markets for you.
Multiple States Parallel: The good news is you can apply to multiple states in parallel through NMLS. You don’t have to do them one by one in sequence (except you might choose to phase them for manageability). So while one state is in review, others can be too. Your overall time to be operational nationwide will be dictated by the slowest (or last) state approval you need.
Factors Affecting Speed: The completeness and quality of your application is a big factor. If you submit all required documents correctly, you significantly reduce back-and-forth with the regulator. An incomplete or inaccurate application (missing info, mistakes in financials, etc.) can cause serious delays. The regulator might come back after a month of review with a deficiency, and the clock effectively pauses until you fix it. Every time you have to submit additional info, it adds weeks. Thus, investing time to prepare a thorough initial application pays off in faster approval. Another factor is responsiveness: when a regulator asks a question, responding quickly (within days) helps keep your file moving. If you take weeks to reply, your application could be set aside in the queue.
Regulatory workload: Sometimes the delay isn’t in your control. Some state agencies are understaffed or dealing with many applications. If a state has a surge in fintech applicants, it might slow everyone’s processing down. Unfortunately, you can’t do much to change that except ensure you aren’t the cause of any extra delays.
Pre-licensure checks: A few states might require additional steps that take time, such as a state police background check, a credit report review, or even an interview. These can add a few weeks on top of paperwork review.
As a rough benchmark, plan for about 6 months on average for a given state license approval, and be pleasantly surprised if it comes sooner. For high-priority states (NY, CA, etc.), prepare for closer to 9–12 months. It’s wise to start the licensing process early relative to your product launch. Some startups begin the process a year in advance of when they hope to be live in certain states. If you need to be operational sooner, you might consider interim approaches (like partnering with an already-licensed entity, often referred to as license sponsorship or agency relationships, while your own licenses are pending, though that comes with its own complexities).
How long is a Money Transmitter License valid, and how often must it be renewed?
In most states, a Money Transmitter License is an ongoing license that must be renewed annually. Typically, your license will come up for renewal each year on a set date (often December 31 or the anniversary of issuance, depending on the state). At renewal, you generally need to:
- Submit a renewal application or attestation through NMLS (or via the state’s system) confirming that you want to renew for the next year.
- Pay a renewal fee. Renewal fees are usually a few hundred dollars, though some states might charge more. For example, if a state had a $1,000 initial fee, the renewal might be $500 annually; it varies.
- Provide updated documentation if required. Commonly, you’ll need to submit updated financial statements (year-end audited financials, if the state requires audits, or at least the most recent statements). You also may need to update any changes in your business (new officers, address changes, etc.) and confirm your AML program is up to date.
- Maintain your surety bond. You must ensure the surety bond remains in effect (bonds often need annual continuation certificates). If your bond is expiring, you have to renew it or replace it so coverage doesn’t lapse. Many states require a bond continuation document uploaded during renewal.
The renewal process via NMLS is relatively streamlined; you can submit multiple state renewals in one workflow if all your info is up to date. But it’s critical not to miss renewal deadlines. If you fail to renew on time, a state can suspend or revoke your license, which means you legally have to stop doing business there until it’s fixed. Operating without a valid license, even due to lapse, could incur penalties.
FinCEN MSB registration (federal) is on a two-year renewal cycle. When you register initially, that registration must be renewed every two years (by December 31 of the second calendar year following your initial registration). FinCEN renewal is just an update filing and does not cost a fee, but it’s required to keep your federal registration active.
So, in summary: state MTLs renew yearly (with fees and some updates), and the federal MSB registration renews biennially. Always mark your calendar for these deadlines. Many companies create a compliance calendar or use NMLS reminders to ensure they begin the renewal process a month or two in advance of deadlines. This way, if any issues arise (say, a financial statement isn’t ready or a bond needs an increase due to higher volume), you have time to address them before the license expiration date.
What are the ongoing compliance requirements after obtaining a Money Transmitter License?
Getting the license is only the beginning. Once you have it, you must maintain compliance continuously to keep it. Key ongoing obligations include:
Anti-Money Laundering (AML) Program: You are required to actively maintain the AML/CFT program you described in your application. This includes monitoring transactions, filing Suspicious Activity Reports (SARs) for any suspected illicit activity, filing Currency Transaction Reports (CTRs) for cash transactions over $10k, and complying with all Bank Secrecy Act requirements. Even if you’re a tech startup, once you’re an MSB you have similar obligations to a bank when it comes to monitoring and reporting certain activities.
Recordkeeping: Keep detailed records of all transactions and customer information. Under federal rules and many state regulations, you must retain transaction records, receipts, customer identification info, and similar data for at least five years from the date of the transaction or the account closure. Some states might have longer retention periods for specific records. Make sure your systems are set up to securely store this data.
Ongoing Reporting to Regulators: Many states require periodic reports from licensed money transmitters. For example, some states require quarterly reports or annual reports of your transmission activities. These reports might include:
- Total transaction volume (dollar amount of transmissions) for the period.
- Number of transactions, and possibly a breakdown (for example, how many payments originated in the state).
- Outstanding payment instruments or customer balances (for example, if you sell prepaid instruments or hold customer funds, how much is currently outstanding).
- Authorized agent lists: if you have agents or delegates (like retail partners), some states want an updated list of those.
- Complaint logs: a few states ask for a summary of complaints received and resolved.
Additionally, at the federal level, MSBs that are licensed will likely need to file the FinCEN Annual Report of MSB Activity and possibly the Quarterly MSB Call Reports. The NMLS MSB Call Report is a standardized quarterly filing where you report your transaction volumes, transactions, and other metrics across all states. Many states use this as part of their supervisory oversight.
Examinations and Audits: Being licensed means you’re subject to regulatory examinations. States can and will conduct periodic exams, which could be on-site (regulators come to your office for a review) or off-site/desk audits (you submit documents for review). An exam might be scheduled every two years or so, depending on the state and your risk profile. During exams, regulators will assess your compliance with laws. They may review your AML program effectiveness, transaction records, financial condition, consumer disclosures, cybersecurity, and more. It’s important to treat exams seriously: respond to regulatory requests, and fix any issues they identify. Some states charge an exam fee or bill you for examiner time.
Maintaining Bond and Net Worth: You must keep your surety bond(s) active. If your transaction volume grows significantly, some states may require you to increase your bond amount. States often have tiered bond requirements (for example, $50k bond for up to $1M annual volume, $100k bond if volume $1–5M, and so on). Similarly, ensure your net worth stays above the required minimum. If you suffer losses that put you under the threshold, you may need owners to infuse capital or risk breaching licensing conditions.
Notifications of Material Changes: Almost all states’ MTL laws require you to notify the regulator of certain changes in your business. Common notifiable changes include:
- Change of company name or address.
- Change in control or ownership: If a new person or entity is acquiring a significant percentage (often 10% or more) of your company, you usually must get regulatory approval before the change. Mergers, acquisitions, or major equity investments are a big deal; states often require advance notice or approval.
- Change of key executives or compliance officer: If your CEO, CFO, or compliance officer changes, you report it. New persons may need to submit background check info for approval.
- Material business model changes: Launching a new product line, expanding into new services, or any change that might affect how you handle money could need notification.
- Cybersecurity incidents or security breaches: Some states require reporting of any security incidents that could affect customer funds or data.
Always check each state’s regulations for what events trigger a notification and the required timeline. Some require 15 days’ notice, others 30 days after a change. Failing to report changes can result in penalties or even revocation of the license.
Consumer Compliance: As a licensed money transmitter, you must follow any consumer protection rules that apply. For example, many states require specific disclosures on receipts (like a statement of consumer rights or refund policies), maintaining a certain customer service contact for complaints, and sometimes adhering to fee caps or refund timing requirements for money transfers. Ensure you implement these operationally.
Renewals: As covered earlier, renew your licenses annually and your FinCEN registration every two years. Missing a renewal is one of the simplest ways to fall out of compliance, so mark those dates carefully.
Overall, think of licensing as not just obtaining a piece of paper, but committing to a regime of ongoing regulatory compliance. Setting up internal compliance management is key. Many companies designate a compliance officer or hire one as they grow. It can also help to use software or consultants to keep track of multi-state obligations. Regulators expect you to be proactive: laws change over time, and as a licensee, you’re expected to stay informed and adapt. Subscribe to updates from state regulators or industry groups so you know if, say, a state increases its bond requirement or passes a new cybersecurity rule affecting MSBs.
Staying compliant isn’t just to avoid penalties; it’s also good for business. It builds trust with banking partners and customers. Conversely, compliance failures (for example, not filing reports or examiners finding serious violations) can lead to fines or even losing your license, which could be fatal to your business in that state. So once you have your MTL, invest in the compliance infrastructure to keep it in good standing.
What are the penalties for operating without a Money Transmitter License?
Operating as a money transmitter without a license is a serious offense. Both state and federal authorities can impose harsh penalties if a company or individual is found transmitting money without the required licenses:
State Enforcement: State regulators or attorneys general can issue cease-and-desist orders to stop your operations if you’re unlicensed. They can also levy civil penalties for each violation. In some states, those fines can be tens of thousands of dollars per day of unlicensed activity, adding up very quickly. States may also bar you from ever getting a license if you’ve willfully operated without one.
Criminal Liability: At the federal level, 18 U.S.C. § 1960 makes it a felony to operate an unlicensed money transmitting business. This law can be applied if you fail to obtain a required state license or fail to register with FinCEN, and you nevertheless continue transmitting money. Violators can face criminal charges, which might result in hefty fines and even imprisonment for responsible individuals. There have been cases of crypto business operators and others being prosecuted under this statute for ignoring licensing rules.
Reputational Damage and Business Impact: Aside from legal penalties, getting caught without a license will severely damage your company’s reputation. You’ll lose the trust of banking partners (banks may shut down your accounts if they discover you were operating unlicensed). Customers may be left in the lurch if you’re forced to suddenly stop operations. And if you plan to apply for licenses later, the fact that you ran unlicensed will be known to regulators through enforcement records and could prejudice your applications.
Customer Remedies: Operating without a license can also mean that contracts you had with customers might be deemed void or unenforceable, since you weren’t legally authorized to perform the service. Customers or counterparties could potentially sue to get their money back in such scenarios. Some states even allow customers to get treble damages from unlicensed operators in civil suits.
In short, the risk is not worth it. Penalties can include substantial fines, orders to disgorge any fees or profits earned, and criminal prosecution. If you’re serious about a fintech or crypto venture that involves money movement, you should take licensing seriously from day one. The costs and effort to get licensed are much preferable to facing enforcement action. Regulators have become increasingly vigilant, especially with the growth of crypto, and several high-profile cases have underscored that authorities will take action against companies trying to skirt the law.
Tip: If you find yourself in a gray area or unsure whether you need a license, consult a legal expert. Some businesses try to operate under the radar or assume they’re small enough not to get noticed. This is not a sound strategy. Enforcement can happen years later, and the penalties can compound. It’s better to either comply with licensing or adjust your business model to clearly avoid regulated activities (if possible) than to operate in an unlicensed, non-compliant manner.
Conclusion
Navigating Money Transmitter Licenses can be complex, especially for startups in the fintech and crypto space where resources may be limited. But with this guide, you have a roadmap of the major questions and challenges. Remember that requirements can evolve as regulations update and new guidance emerges (for example, stablecoin-specific rules or changes in state laws). Always stay informed and when in doubt, seek professional advice from Ridgeway Financial Services. Achieving multi-state MTL compliance is a significant undertaking, but it also builds a strong foundation for your company’s credibility and For more focused support for fintech ventures, explore our fintech industry resources.
Related reading: learn who needs a Money Transmitter License and review our overview of AML requirements.
Reviewed by YR, CPA
Senior Financial Advisor