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Crypto Law/Level V · Builders and launchers/5.2 Money rules/Lesson 2

State money-transmitter licences

Why a US crypto business that holds or moves customers’ money may need a licence in nearly every state, how a missing state licence becomes a federal crime, and what multistate enforcement looks like.

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. Avoid custody of customer funds and fiat. Non-custodial software is usually outside state money-transmitter laws, which saves the cost of licences, bonds and net-worth requirements, but check each state’s own wording, which may differ from FinCEN’s.
  2. Route fiat on-ramps and custody through a partner licensed in the relevant states, and confirm its licences in NMLS Consumer Access, which is free, so that the licensing burden stays with the partner.
  3. Geofence states you will not license in. Montana does not regulate money transmitters, and some states license only fiat-related activity, but blocks must really work: unknowing operation without a required licence can still be a §1960 crime.
  4. Where licences are unavoidable, apply through NMLS. States that adopted the Money Transmission Modernization Act use common standards, which reduces repeated work, but bonds, net worth and permissible investments still apply state by state.
  5. If you discover you operated without a licence, stop serving those customers and return their assets; in Abra (2024) the states waived $250,000 penalties per state so that customers could be repaid.

MaterialsNMLS Consumer Access (nmlsconsumeraccess.org), the public search of state licences18 U.S.C. §1960(b)(1)(A), on operating without a required state licenceThe CSBS Money Transmission Modernization Act page (csbs.org)The June 2024 CSBS announcement of the multistate Abra settlement

Wonder

  1. Is registering with FinCEN enough to run a crypto business in the US?
  2. Can missing a state licence lead to a federal criminal charge?
  3. Why do some apps refuse customers from particular states?

Explore

  1. Federal registration with FinCEN (lesson 1.3.4) does not replace state law. Each US state decides for itself who must hold a money transmitter licence (MTL), a permission from the state’s banking or financial regulator to move or hold money for the public. A business with customers in many states may need many separate licences, each with its own application, fees, financial requirements, examinations and reports. New York’s BitLicense and California’s Digital Financial Assets Law are crypto-specific regimes covered in lesson 1.3.6; this lesson covers the general money-transmitter layer that applies across most of the country and how it reaches builders.
  2. Whether crypto activity needs a licence varies by state. The Conference of State Bank Supervisors (CSBS), the national body of state regulators, said in June 2024 that 37 states required a money transmitter licence, or something similar, for virtual currency transmission, and that a handful of those required it only when government-issued money was involved, not for crypto-to-crypto transactions. Montana is the outlier at the other end: its banking division states that it does not regulate money transmitters. Because the answer differs by state and changes with new laws, the business’s activity has to be checked against each state’s current statute and regulator guidance, not a single national rule.
  3. Applications run through the Nationwide Multistate Licensing System (NMLS), which CSBS operates and through which state regulators license and supervise more than 33,000 non-bank financial companies. Licensing usually means meeting standards for net worth, a surety bond and ‘permissible investments’, assets kept to cover what is owed to customers, plus detailed background and financial information about the company and the people who control it. CSBS promotes a model law, the Money Transmission Modernization Act, that sets common versions of these standards; CSBS says more than half the states have enacted it in full or in part, though adoption and interpretation still vary between states.
  4. A missing state licence can become a federal crime. Under 18 U.S.C. §1960(b)(1)(A), a money transmitting business is ‘unlicensed’ if it operates without a required state licence where doing so is a misdemeanour or felony under state law, ‘whether or not the defendant knew’ a licence was required; the penalty is up to five years in prison. In August 2025 a senior Justice Department official said prosecutors would not bring such licence-only charges without evidence that the defendant knew of the requirement and wilfully broke it. That is charging policy, not a change to the statute, and states keep their own civil and criminal powers.
  5. States act together against unlicensed crypto firms. On 26 June 2024 CSBS announced that 25 state regulators had settled with the crypto platform Abra and its chief executive for operating without required state licences. The case began with a referral from securities regulators. Abra agreed that it had ceased trading services for US customers as of 15 June 2023, and agreed to return remaining customer assets in the settling states, up to $82.1 million, while the states waived a $250,000 penalty per jurisdiction to make repayment possible. The chief executive agreed to stay out of licensed money transmitters in those states, except as a passive investor, for five years.
  6. For builders, the practical questions are who holds customer value and where customers live. Non-custodial software is usually analysed differently from custody (lesson 5.2.1), but state statutes do not all use FinCEN’s wording, and a bill to protect non-controlling developers was still pending in Congress in October 2026 (lesson 5.2.7). Many products block or ‘geofence’ some states rather than license there, which only works if the block is real. A practical check: look up the legal name of any platform you use or plan to partner with in NMLS Consumer Access and compare the states listed with the states where it accepts customers.

Key facts

  • Under 18 U.S.C. §1960(b)(1)(A), operating without a required state money transmitting licence can be a federal crime whether or not the defendant knew a licence was required.
  • The maximum prison term under 18 U.S.C. §1960 is five years.
  • In June 2024 CSBS said 37 states required a money transmitter licence or similar licence for virtual currency transmission.
  • Montana’s Division of Banking and Financial Institutions states that it does not regulate money transmitters.
  • On 26 June 2024, 25 state financial regulators announced a settlement with Abra for operating a crypto business without required state licences.
  • In the Abra settlement, up to $82.1 million in assets was to be returned to customers and states waived a $250,000 penalty per jurisdiction.

Exercise nine, six, three, one

9CollectList up to 9 crypto services you use or might build that touch customers’ money, such as an exchange account, a payment app, a kiosk, a custody service, an on-ramp partner or a stablecoin wallet (some lists are shorter).
6ClusterSort them into 6 categories: holds customer crypto, holds customer cash, converts cash to crypto, crypto-to-crypto only, software the customer controls, and unclear.
3DistillReduce the 6 to 3 groups: likely to need state licences, likely outside state money-transmission law, and depends on the particular state.
1CrystallizeWrite 1 sentence explaining why a FinCEN registration alone does not show that a crypto business may lawfully serve customers in your state.

Fact check

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

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