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USA - 50 State Money Transmitter Licensing Requirement Breakdown


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#1 Charlie Shrem

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Posted 30 October 2013 - 07:50 PM

Hey All,

This is an excellent PDF provided to me by a friend who runs the National Money Transmitter Association in the USA.

Background:
Briefly for those who don't know, with few exceptions, each money services business (MSB) must register with the Department of the Treasury and follow certain KYC and AML guidelines and requirements. Note that failure to register when required to do so or obtain necessary state licensed, can lead to jail time. Most states require money services businesses operating within their territory to be licensed with the state banking department. Note that many states also require registration of foreign MSBs that transact with their residents. For example, money transmitters with no physical presence in New York that transact with residents of New York must be licensed in the State of New York

This is one of the largest obstacles Bitcoin companies are currently facing to legally operate in the USA.

It's extremely difficult for MSB's and MTB's to get bank accounts as well.

The National Money Transmitter Association put together the following amazing document which outlines it state by state.

The second attachment is a white paper on Government Oversight of Non-Bank Financial institutions In the United States and Why Change is Urgently Needed. A White Paper Prepared by The National Money Transmitters Association David Landsman, Executive Director Originally Published September 12, 2012.

I've done extensive research and have experience in this field, feel free to ask any questions!

- Charlie

Attached Files



#2 Richard Forsyth

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Posted 15 November 2013 - 10:06 PM

I am very interested in this discussion Mr. Shrem.

I am curious what the watershed mark is for a bitcoin exchange with regards to general and specific long-arm jurisdiction.  I am aware that the states have different standards; and in some, mere existence as an internet-based company can get you qualified, but the concepts of internet long arm have not been fully vetted in the Supreme Court.  Of course, at a minimum, a company must reach the notice of a state for a jurisdictional question to even be asked. The application for and acquisition of 48 states' transmitter licenses is certainly a safe way to approach things, but is it legally and financially necessary?  Consider that PayPayl, 5 years in to its very successful operations, only had a few licenses and continued to hold off the states as it applied and acquired them piecemeal. It currently holds all licenses for the 48 states who elect to regulate, but only acquired many of them recently. Context is everything, of course, but I expect that a company could stair-step the process by acquiring a few at a time as it grows. Without specific targeting of state residents, contact typically has to be substantial or continuous--implying large volume or significant time.  I know much is risked, but I am curious about the real-world implications of this stair-step approach: specifically, acquiring licenses in states where a physical presence is established, and then acquiring licenses on a state-by-state basis according to volume.  A bootstrap strategy, if you will.

#3 Mike Hayes

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Posted 08 March 2014 - 01:20 AM

 Richard Forsyth, on 15 November 2013 - 10:06 PM, said:

I am very interested in this discussion Mr. Shrem.

I am curious what the watershed mark is for a bitcoin exchange with regards to general and specific long-arm jurisdiction.  I am aware that the states have different standards; and in some, mere existence as an internet-based company can get you qualified, but the concepts of internet long arm have not been fully vetted in the Supreme Court.  Of course, at a minimum, a company must reach the notice of a state for a jurisdictional question to even be asked. The application for and acquisition of 48 states' transmitter licenses is certainly a safe way to approach things, but is it legally and financially necessary?  Consider that PayPayl, 5 years in to its very successful operations, only had a few licenses and continued to hold off the states as it applied and acquired them piecemeal. It currently holds all licenses for the 48 states who elect to regulate, but only acquired many of them recently. Context is everything, of course, but I expect that a company could stair-step the process by acquiring a few at a time as it grows. Without specific targeting of state residents, contact typically has to be substantial or continuous--implying large volume or significant time.  I know much is risked, but I am curious about the real-world implications of this stair-step approach: specifically, acquiring licenses in states where a physical presence is established, and then acquiring licenses on a state-by-state basis according to volume.  A bootstrap strategy, if you will.

I don't know where you are coming from with those comments but they don't look like good suggestions.

They look like, well, bad suggestions.