How to Obtain a Cryptocurrency Money Transmitter License - Bitsonline

How to Obtain a Cryptocurrency Money Transmitter License

The technology behind virtual currency is taking hold of several different markets and creating opportunities for entrepreneurs and business-minded professionals around the world. The rapid influx of cryptocurrency businesses over the last few years has generated both positive and negative buzz, not to mention a whirlwind of regulatory shifts on state and federal levels. Whether businesses are operating money transfer platforms, bitcoin ATMs, or other online systems that involve cryptocurrency movement, anyone interested in joining the ranks of virtual currency business owners need to be aware of one glaring hurdle – securing a cryptocurrency money transmitter license.

This is a sponsored article provided by JW Surety Bonds. This article is not legal advice from Bitsonline. 

According to federal guidelines, a money transmitter is any business that accepts money from one source and sends it to another or helps exchange on currency for another. In the world of virtual currency, the money transmitter label may extend to companies that exchange fiat currency for cryptocurrency like Bitcoin, as well as those that work as payment processors and accept virtual currency from customers. Money transmitters are required to hold a license in order to operate a business legally, and in many cases, this extends to cryptocurrency companies.

To secure a cryptocurrency money transmitter license, businesses need to follow the steps below to ensure they are in compliance with state and federal laws.

Meet Federal Requirements

Under federal law, cryptocurrency is not clearly defined as a legal tender. Instead, it is a commodity which means businesses operating in the industry may need to comply with specific regulations. The Financial Crimes Enforcement Network, FinCEN, mandates that companies that exchange commodities or help facilitate the transfer of commodities for fiat currency must register with the agency. The registration process can be completed online via a short form.

Beyond the FinCEN registration, cryptocurrency businesses also need to comply with anti-money laundering laws. An anti-money laundering program must be in place that ensures accurate recordkeeping of customer information and transaction details over time. A strong AML program includes a written policy used across a company for all owners and employees, as well as periodic review of the procedures in place to help prevent money laundering among customers.

Understand State Guidelines

In addition to meeting federal requirements for FinCEN registration and developing an AML program, cryptocurrency businesses also need to recognize state regulations. Nearly all states require money transmitter companies to apply for and maintain a license to do business, but not all jurisdictions have defined cryptocurrency under the law. It is essential to check with state where a business plans to operate to determine what, if any, money transmitter licensing requirements must be met and if a cryptocurrency business falls under the category of a money transmitter.

If a state does have specific guidelines for virtual currency money transmitters, the licensing process may include one or more of the following requirements:

  • Filling out a detailed application that provides information about the business, its owners, and its location
  • Completing a criminal or civil background check
  • Submitting a licensing fee to the state
  • Detailing the financials of the business and personal assets and liabilities of all owners and shareholders

In some states, an investigation is also required after an application for a money transmitter license is received. This state investigation involves a deeper dive into the details of the business as well as verification of financial documents provided in the application process. Money transmitter applicants in cryptocurrency need to understand these state requirements thoroughly before submitting an application.

Submit a Formal Application

After determining what requirements need to be met at the state level, virtual currency businesses can begin gathering the necessary information to submit a formal application. One significant hurdle in meeting state regulations is the minimum net worth requirement several states impose. Money transmitter businesses must be able to prove that their net worth meets the threshold to obtain a license, and this minimum can range from $10,000 up to $500,000 depending on the state. Proof of assets and liabilities on both the personal and business sides of the line is often necessary for submitting a formal application.

Secure a Money Transmitter Bond

Finally, obtaining a money transmitter license may also require posting a security, often in the form of a surety bond. A surety bond for cryptocurrency money transmitter businesses works as a safeguard against fraudulent or illegal business practices, but for the public and the state, not the business itself. Having a surety bond in place offers a guarantee that if a virtual currency business does not operate according to state or federal laws, a claim can be made for compensation to cover financial damages.

Obtaining a money transmitter license as a cryptocurrency business is a daunting task, but understanding the federal and state guidelines alongside the application, net worth, and surety bond requirements eases the process from the start.

Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.


Image via JW Surety Bonds

This is a sponsored article, provided by JW Surety Bonds. Bitsonline is not responsible for the products and or services of this company and its clients. This article contains links to third-party websites. Bitsonline is not responsible for the content on those websites.

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