Money transmitter businesses need to acquire MTL or Money Transmitter License to be able to operate legally.
What Is a Money Transfer License (MTL)?
Also known as a money transmitter license, MTL is issued to money transmitters to legally allow them to conduct business. Just like you need a driving license to drive a vehicle, a money transmitter license is required to work as a money transmitter. Its purpose is to help the government prevent money-related crimes, such as money laundering. When a money transmitter holds an MTL, it has to operate in the industry while complying with the law. Typically, it is issued by FinCEN (the Financial Crimes Enforcement Network of the United States Department of Treasury).
Role of Money Transmitters
To understand who needs to acquire a money transfer license, it is important to know who a money transmitter is. A money transmitter or a money service business is someone who conducts their business in one or more of the following capacities:
Runs a currency exchange (both fiat and cryptocurrencies)
Issuing or selling traveler’s checks or money orders
Not all money service businesses need to go through licensing. Federal or state laws dictate whether a money transmitter/transfer license is required or not. A money service business likely needs a money transfer license if it is dealing with money (and receiving a benefit from the activity) within and outside of the United States on someone’s behalf.
Obligation to Acquire a Money Transfer License
Whether or not you need a money transfer license depends on whether you are considered an MSB at all. You must check with your state laws to confirm if your business model falls under the definition of a “money service business”.
Mostly, if someone receives money to transmit it to another location, it is considered an MSB and needs to go through licensing. Also, a business is considered an MSB if it transfers money through fax, wire, a payment gateway, etc.
Do Digital Currency Transmitters Need an MTL?
It all depends on the country from where you are operating your business. In the US, an MSB may need to hold an MTL if the company operates in the cryptocurrency space.
A few countries, where selling cryptocurrencies as a business is legal, exempt MSBs involved in the crypto space from acquiring a money transfer license, however, many do not. The same goes with the United States of America where only a few states offer this exemption. Therefore, you should check with your state laws to see if it exempts your business from licensing or not.