Money Transfer License

What Is a Money Transfer License (MTL)?

Also referred to as a money transmitter license, an MTL is a legal authorization granted to money transmitters, allowing them to conduct their business activities.

Like a driving license that permits individuals to drive vehicles, a money transmitter license is necessary for individuals and entities operating as money transmitters.

The primary purpose of this license is to aid the government in preventing money-related crimes, including money laundering.

When money transmitters hold an MTL, they must comply with the law while operating in the industry.

FinCEN, the Financial Crimes Enforcement Network of the United States Department of the Treasury, typically issues the license.

Role of Money Transmitters

To understand which entities need to obtain a money transfer license, it is important to define what a money transmitter is.

A money transmitter, also known as a money service business, engages in one or more of the following activities:

  • Operating a currency exchange involving both fiat and cryptocurrencies
  • Providing check cashing services
  • Issuing or selling traveler’s checks or money orders

Not all money service businesses require a money transfer license.

The necessity for such a license depends on federal or state laws governing the specific activities of the business.

Generally, a money service business will likely require a money transfer license if it handles money and derives a benefit from the domestic and international activity on behalf of others.

Obligation to Acquire a Money Transfer License

The requirement for a money transfer license depends on whether an entity falls under a money service business (MSB) definition.

It is essential to consult state laws to determine if your business model aligns with the classification of a “money service business”.

In most cases, if an entity receives money to transmit it to another location, it is considered an MSB and must obtain a license.

Similarly, if a business transfers money through fax, wire transfers, or payment gateways, it falls under the MSB category.

Do Digital Currency Transmitters Need an MTL?

The requirement for a money transfer license depends on the country where the business operates.

In the United States, an MSB involved in cryptocurrency operations may need to hold an MTL.

While a few countries have exemptions for MSBs operating in cryptocurrency, permitting them to operate without a money transfer license, many countries do not offer such exemptions.

In the United States, only a few states provide this exemption.

Therefore, reviewing state laws to determine whether your business is exempt from licensing requirements is crucial.