Adam Tracy Explains State Money Transmitter Licenses

State Money Transmitter Licenses & Crypto Exchanges

A common question that I receive is what license(s) must I obtain in order to operate as a cryptocurrency exchange in the United States? Unfortunately, that answer is forty-nine (49) state money transmitter, or its equivalent, licenses. You can find each state, the relevant state agency, application cost and annual fee below:

As you can see, the process of obtaining each of the required licenses will cost approximately $56,000 in application fees alone. Annual renewal fees will run you approximately $41,000 per annum. In addition, each state calls for an “examination fee” to cover the cost of onsite inspection of company operations. The fee generally costs around $400-$600 plus expenses related to the examination.

Moreover, every money transmitter or similar money service operator must register as a “Money Service Business” with FinCEN, although there isn’t a fee to register.

Each state also requires the licensee to carry a surety bond. A surety bond works as a quasi form of insurance. Money transmitter clients who suffer a financial loss as a result of the licensee’s fraudulent practices may have claim against the bond. If valid, the surety will pay the claim, up to the full amount of the bond. The licensee is, in turn, responsible to the surety for the amount of the claim paid out to the claimant.

The three parties bound together in a cryptocurrency or money transmitter license bond are the state entity requiring the bond (the obligee), the money transmitter (the principal), and the company that underwrites and issues the bond (the surety). The required bond amount varies widely from state to state. In some states, the required bond amount for becoming licensed as a money transmitter is based on the applicant’s transaction volume. In other states, it’s a standard amount for all applicants for a money transmitter license. In either case, the required bond amount is set by the State.

The cost for a surety bond is driven by three factors: (a) the applicant’s credit; (b) the assessed risk inherent in the covered business and (c) the amount of the bond. In the author’s experience, a general rule of thumb when estimating costs of a surety bond in the context of cryptocurrency operations is $3,000 for every $50,000 in surety bond coverage, assuming an average applicant credit profile. Again, a surety bond is a requirement for each state, thus the cost can range well over $100,000 for the total bonding requirement.

The majority of money transmitter applications are made online through the Nationwide Multistate Licensing System & Registry (“NMLS”), which provides an easy interface for applications that anybody may access. Currently, 41 states as well as the District of Columbia and Puerto Rico are covered by the common application platform. Nevada, Alabama, New Jersey, Delaware, Florida, Missouri, Virginia and Colorado are currently not accessible through the NMLS. Montana does not license money transmitters.

The above document also identifies which states have adopted the “agent of payee” exemption from state money transmitter licensing requirements. Generally speaking, the agent of payee exemption exempts from licensing entities that accept payments from consumers on behalf of a merchant, creditor, or biller. The most obvious example of this is a billing or servicing firm that collects bill payments from consumers on behalf of a utility or credit finance company. The agent of payee exemption has little application among cryptocurrency companies.

From a practical perspective, while seemingly daunting, the process for obtaining the requisite 49 licenses does not, in fact, present a significant legal hurdle. Common application requirements include a business plan, accountant-prepared financial statements and financial projections, together with customary statements of net worth for the applicant and its control persons. Having had the opportunity to go through this process on a number of occasions, it is worth mentioning that state money transmitter laws are often archaic and on the whole have little application to cryptocurrency exchanges. Generally speaking, money transmitter laws were designed for the remittance business well before blockchain technologies came to be.

As always, I welcome your comments and questions – [email protected]


A former professional rugby player, Adam S. Tracy brings over twenty years’ experience as an attorney, consultant and dealmaker with a particular focus on cryptocurrency, digital products, payments and immersive corporate structures. As an accomplished executive and advisor to high risk merchants and stakeholders, Adam has proven himself as a results oriented, decisive leader with proven success advising early market entrants, technology adapters, as well as established participants across a wide range of verticals. Adam Tracy’s attack-first personality allows him to excel in dynamic, demanding environments including complex corporate negotiations, distressed environments and regulatory investigations.

In addition, Adam S. Tracy also has a successful track record co-founding high risk industry ventures, building & leading cross-functional teams, and spearheading diverse corporate transactions. A serial entrepreneur, Adam has successfully started and created exits across a wide swath of markets, including various mobile SaaS ventures, nutraceuticals, peer-to-peer payment systems, and several telemarketing-based ventures. Moreover, as a recognized expert in the payments field, Adam Tracy has been a blockchain and digital currency evangelist and influencer since the early days of Bitcoin.

Utilizing his proprietary “Pre-Event Driven™” strategy for decision making, Adam S. Tracy further leverages his over twenty years’ experience to create cost-effective, value-add solutions for each client. A data-driven acolyte, Adam continually refines his strategies based on field studies and data collection. Moreover, Adam Tracy further augments his range of solutions by actively networking with regulators, liquidity providers, legal and compliance experts, deal-flow brokers, investors and management of leading high risk industry ventures.

Adam S. Tracy earned his Bachelor of Science in Computer Applications and Bachelor of Science in Finance from the University of Notre Dame. He subsequently earned his Masters in Business Administration from the DePaul Kellstadt Graduate School of Business, while concurrently earning his Juris Doctorate from the DePaul College of Law. Adam lives outside Chicago with his with his wife, four dogs, and two cats.

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