MSTR Cat

Crypto Law/Level V · Builders and launchers/5.2 Money rules/Lesson 1

Money transmission and FinCEN’s 2019 guidance

How FinCEN’s May 2019 guidance sorts wallets, kiosks, dapps, mixers and token sales into ‘money transmitter’ or not, and why control over other people’s value is the question that decides it.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Build non-custodial software where users hold their own keys. Under FIN-2019-G001 an unhosted-wallet provider is not a money transmitter, so there is no registration or AML programme, provided you have no key, relayer or admin path to user funds.
  2. Publishing a DApp is not money transmission merely because you created it (FIN-2019-G001). The catch is that operating or deploying it yourself to accept and transmit value brings the MSB rules back.
  3. Sell tokens through an open market instead of a preferential presale. FinCEN treats the seller in a preferential sale as an administrator and money transmitter, and later decentralisation does not change that.
  4. If custody is unavoidable, use a licensed custodian or on-ramp partner instead of holding funds yourself. Otherwise FinCEN MSB registration (Form 107) is free and due within 180 days, with renewal every two years.
  5. The DOJ’s August 2025 policy declines §1960(b)(1)(C) charges for truly decentralised software with no third-party custody, but that is charging policy, not statute, and it can change.

MaterialsFinCEN guidance FIN-2019-G001, ‘Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies’ (9 May 2019)The definition of ‘money transmitter’ in 31 CFR 1010.100(ff)(5) (on ecfr.gov)18 U.S.C. §1960, the federal crime of running an unlicensed money transmitting businessA diagram of your own product showing every key, admin role or upgrade path that can move a user’s assets

Wonder

  1. If I deploy a smart contract that moves other people’s tokens, am I a money transmitter?
  2. Does selling my own new token to early buyers count as money transmission?
  3. Is a 2019 guidance document binding law, and has anything changed since?

Explore

  1. Under US federal rules, a ‘money transmitter’ is a person who accepts currency, funds or ‘other value that substitutes for currency’ from one person and transmits it to another location or person by any means (31 CFR 1010.100(ff)(5)). Convertible virtual currency (CVC), meaning crypto that has a value in real money or can be swapped for it, counts as such value. A money transmitter is a money services business (MSB) and takes on registration, anti-money-laundering and reporting duties (lesson 1.3.4). The 2013 split between ‘users’ and ‘exchangers’ is covered there; this lesson is about how the rules map onto specific crypto business models.
  2. FinCEN’s guidance FIN-2019-G001, issued on 9 May 2019, says it creates no new requirements; it gathers rulings issued since 2011 and applies them to common models. For wallets it asks four questions: who owns the value, where it is stored, whether the owner deals directly with the payment system, and whether the provider has total independent control over it. A hosted (custodial) wallet provider holds and moves customers’ coins, so it is a money transmitter. With an unhosted wallet, the owner holds the keys and has total control, so the software provider is not one, and an owner paying for goods on their own behalf is not one either.
  3. The guidance then works through other models. A person who buys and sells crypto as a business, a ‘peer-to-peer exchanger’, is a money transmitter whether or not the activity is regular or formal, though infrequent, not-for-profit activity is exempt. Owner-operators of crypto kiosks are money transmitters. When a decentralised application (DApp) accepts and transmits value, the definition applies to the DApp, its owners or operators, or both, even if it is not run for profit. A trading platform that only posts bids and offers, leaving the parties to settle between their own wallets, is not a transmitter; one that buys from the seller and sells to the buyer is.
  4. Privacy tools get a sharp line. An ‘anonymizing services provider’, which accepts value and passes it on in a way designed to hide who sent it, is a money transmitter. An ‘anonymizing software provider’ is not, because suppliers of software or other tools are treated as engaged in trade, under the exemption for ‘delivery, communication, or network access services’. The guidance adds, in a footnote, that a business which designs its system so that compliance is difficult cannot use that difficulty as an excuse. Where a non-custodial mixer falls between those two descriptions is exactly what the Tornado Cash and Samourai prosecutions fought over (lesson 5.2.7).
  5. Token launches are addressed directly. In a preferential sale of a new coin to a select group of buyers, FinCEN treats the seller as a money transmitter acting as an ‘administrator’, because at the time of the sale it alone can issue and redeem the units; later decentralisation does not change that status. By contrast, a DApp developer is not a money transmitter merely for creating the application, even one meant to facilitate financial activity, unless it uses or deploys the DApp to transmit money itself. Securities law can apply to the same sale on a separate track (lesson 5.1.3), and states have their own licensing tests (lesson 5.2.2).
  6. Guidance is FinCEN’s interpretation, not a statute, and courts and prosecutors can read the law differently. On 21 August 2025 a senior Justice Department official said prosecutors would not approve new charges under 18 U.S.C. §1960(b)(1)(C) against third parties where software is ‘truly decentralized’, solely automates peer-to-peer transactions and nobody else has custody and control of user assets; that is charging policy, which can change. On 5 October 2026 FinCEN also withdrew its December 2020 proposal for reporting on transfers to unhosted wallets. A practical check: list every key, admin role, relayer or upgrade path that could move a user’s assets without that user’s signature.

Key facts

  • FinCEN issued guidance FIN-2019-G001 on convertible virtual currency business models on 9 May 2019.
  • Under FIN-2019-G001, a hosted wallet provider that receives, stores and transmits crypto for accountholders is a money transmitter.
  • FIN-2019-G001 says an anonymizing services provider is a money transmitter, while an anonymizing software provider is not.
  • FIN-2019-G001 treats the seller in a preferential sale of a new convertible virtual currency as a money transmitter acting as administrator.
  • Operating an unlicensed money transmitting business is punishable under 18 U.S.C. §1960 by up to five years in prison.
  • On 5 October 2026 FinCEN announced the withdrawal of its December 2020 proposed rule on transactions involving unhosted wallets.

Exercise nine, six, three, one

9CollectList up to 9 functions in a crypto product you use or are building, such as holding keys, swapping, matching orders, relaying transactions, running a kiosk, selling a new token or mixing coins (some lists are shorter).
6ClusterSort them into 6 categories: custody of user assets, buying and selling as a business, order matching only, software users run themselves, privacy features, and token issuance.
3DistillReduce the 6 to 3 groups: functions FIN-2019-G001 treats as money transmission, functions it treats as software or trade, and functions whose status depends on who holds control.
1CrystallizeWrite 1 sentence stating, for one function on your list, who has total independent control over the value and what that means under FinCEN’s 2019 guidance.

Fact check

Dates, figures and claims checked against the published sources listed below.

Open in the interactive academy →

PT ES ZH JA KO RU DE FR MS