As the digital asset industry continues to grow, regulators also have grown more and more active in the space. In addition, with cryptocurrency and payments as one of the main use cases for digital assets thus far, it is no surprise that regulators have devoted significant attention to those facilitating transactions in cryptocurrencies and the issue of whether such facilitators should be considered money transmitters.

Generally, money transmitters are entities that act as payment intermediaries between two parties, although different jurisdictions may take a different approach on what should fit in that definition.  Money transmitters are regulated at the federal and state level. At the federal level, the primary regulator is the Financial Crimes Enforcement Network (“FinCEN”). At the state level, each state (other than Montana) regulates money transmitters separately. The sheer number of jurisdictions regulating money transmitters has resulted in a vast array of divergent regulatory approaches, including in how to apply existing money transmitter laws to the world of digital assets. Any two jurisdictions could take widely varying views on how digital asset companies should be regulated.

Because companies operating in digital assets will often prefer for their services to be widely available, any company engaging with digital assets should think carefully as to which of the current regimes may apply to its business. Below, we discuss broadly the current state of play in money transmission regulations across the different regulators.


FinCEN was one of the first regulators to lay out its approach for digital assets, publishing guidance in March 2013 on the application of FinCEN’s existing regulations to persons involved with “virtual currencies” (the “2013 CVC Guidance”). FinCEN regulates all “money service businesses” (“MSBs”), a term that encompasses a number of different types of businesses, including money transmitters. FinCEN defines money transmission as “the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means” (emphasis in original).[1] The reference to “value that substitutes for other currency” is the basis for extending money transmission laws to transactions in virtual currency.

In the 2013 CVC Guidance, FinCEN defined “virtual currency” as “a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency.” The money transmission laws apply specifically to “convertible” virtual currency (“CVC”), which FinCEN defined as a virtual currency that “either has an equivalent value in real currency, or acts as a substitute for real currency.”

A person involved in CVCs can take on three roles according to FinCEN: user, exchanger or administrator.

  • A user is someone who obtains virtual currency to purchase goods or services.
  • An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency.
  • An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.

Users are not MSBs in and of themselves, but exchangers and administrators that accept and transmit a CVC or buy or sell CVC for any reason are money transmitters under FinCEN’s regulations, unless a limitation to or an exemption from the definition applies to the person.

The 2013 CVC Guidance also describes a few sample scenarios and examines the circumstances in which the persons participating would be MSBs. Such scenarios include (i) electronic trading in e-currencies or e-precious metals, (ii) activities involving a CVC that has a centralized repository and (iii) activity involving a de-centralized CVC that has no central repository and no single administrator, and that persons may obtain by their own computing or manufacturing effort (e.g., mining).

In 2019, FinCEN published follow-up guidance (the “2019 CVC Guidance”), again discussing the parameters surrounding what qualifies as money transmission under current regulations. The guidance itself largely followed the 2013 CVC Guidance, but it provides a much more extensive list of potential business models and activities and discusses which parties to such models would require money transmitter licensing. Such businesses, products and activities include:

  • CVC wallets;
  • CVC kiosks or automated teller machines;
  • Decentralized applications (“DApps”);
  • Anonymity-enhanced CVCs;
  • CVC payment processors;
  • Online casinos using CVCs;
  • CVC exchanges;
  • initial coin offerings; and
  • CVC miners.

FinCEN has not issued any further substantial guidance since the 2019 CVC Guidance but continues to issue enforcement actions against MSBs engaged in CVC activities (the most recent as of the date of this post being BITMEX, a CVC derivatives exchange, in August 2021). FinCEN also hired its first “Chief Digital Currency Advisor” in July 2021.

If determined to be an MSB, a CVC will need to comply with FinCEN regulations, including establishing an AML program.

State Law

As alluded to earlier, states have taken, and are continuing to take, a broad range of approaches to regulating digital asset activities.

For example, some states have amended or interpreted their money transmitter licensing laws to apply to the receipt and transmission of virtual currencies.[2]  Other states, including New York and Louisiana, have established, or have introduced legislation for, an entirely separate framework for regulating virtual currency activities.[3]  New York’s “BitLicense” has gained particular notoriety. There are also states that have yet to adopt a position on the matter.

Some virtual currency businesses may be able to utilize exemptions from a state’s money transmission laws (e.g., payment processors or delegated agents of licensees), but exemptions can also vary widely from state to state, so it is likely that if a virtual currency business is relying on an exemption in some states, there will be other states that require licensing.

For businesses licensed or required to be licensed under state law, state money transmission laws generally impose reporting, assessment, and investment maintenance requirements and authorize the state to conduct examinations and investigations of licensees. Money transmitters will also usually be required to post a surety bond in addition to initial and ongoing licensing fees. As a result, compliance with the many varied money transmission regimes can be costly and time-intensive.

Attempts at Uniformity

Over the years, there have been attempts to make the varying money transmission statutes and regulations more uniform. The most prominent recent development has been a proposed uniform law by the Conference of State Bank Supervisors (“CSBS”): the “Money Transmission Modernization Act” (the “CSBS Act”). You can view a more in-depth discussion of the CSBS Act on our specific post on the subject, but broadly, the CSBS Act provides a definition of the term “money transmission,” including exemptions, and sets out specific rules for digital assets. CSBS aims to have all states adopt the CSBS Act to create uniformity. Whether enough states will adopt the CSBS Act for there to be an impact is yet to be known.

Alternatively, in July 2018, the Office of the Comptroller of the Currency (the “OCC”) began accepting applications from fintech companies for a special purpose national bank charter (a so-called “fintech charter”). The fintech charter would carry a higher federal regulatory burden compared to the MSB designation, but it would preempt state laws, eliminating the need to apply for any state money transmission licenses.[4]  The fintech charter was immediately challenged by the New York State Department of Financial Services (“DFS”) on the grounds that the OCC could not provide charters to non-depository institutions. CSBS also filed a suit. After an initial DFS victory in 2019, the court of appeals reversed the lower court’s decision in 2021, potentially paving the way for the OCC fintech charters to finally move forward.

With the uncertainty of state adoption for the CSBS Act and legal uncertainty for the fintech charter, it is unclear how or even whether a path to uniformity is near, but both proposals evidence that state and federal regulators recognize there is a pressing need to break down some of the artificial barriers in money transmission regulation.


While there is some hope for uniformity, the current legal landscape for businesses dealing in digital assets is complex. Between FinCEN and the various state regulators, determining whether a business has any regulatory obligations and navigating any such obligations can be a difficult task. Any business should carefully consider whether or not its business model may be considered money transmission by FinCEN or a state before moving forward — and should be prepared to adopt any compliance measures that may be required.


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[1] 31 CFR 1010.100(ff)(5)(i)(A).

[2] See, e.g., RCW 19.230.010(18) (Washington); Vt. Stat. Ann. tit. 8, §2500(13) (Vermont).

[3] See, e.g., 23 NYCRR Part 200 (New York); La. R.S. §§ 6:1381–6:1394 (Louisiana).

[4] In the summer and fall of 2020, Brian Brooks, the OCC comptroller at the time, stated that the OCC was also contemplating a specific charter for payments companies that would effectively be a national version of a state money transmitter license.  Little has been heard of the charter since the change in administration, however, suggesting the project has been either abandoned or delayed.


Aseel Rabie is a corporate counsel and a member of Debevoise’s Banking Group. She can be reached at


Jonathan Steinberg is a corporate associate and a member of Debevoise's Financial Institutions Group. He can be reached at

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