Money Transfer License

November 21, 2023 - Around 3 mins mins to read

Understanding the Money Transfer License (MTL)

A Money Transfer License (MTL), also referred to as a money transmitter license, is a legal document that is issued to money transmitters. Similar to a driver’s license that grants permission to drive a vehicle, a money transmitter license is necessary for individuals to operate as money transmitters. The primary objective of this license is to assist the government in preventing money-related crimes, such as money laundering. When a money transmitter possesses an MTL, they are obligated to conduct their operations within the industry while adhering to the law. Typically, the license is issued by FinCEN, which is the Financial Crimes Enforcement Network of the United States Department of Treasury.

The Role of Money Transmitters

In order to determine who needs to obtain a money transfer license, it is important to understand the role of a money transmitter. A money transmitter, also known as a money service business, engages in various activities, including currency exchange (both fiat and cryptocurrencies), check cashing, and the issuance or sale of traveler’s checks or money orders.

Not all money service businesses are required to obtain a money transfer license. The necessity of a license is determined by federal or state laws. If a money service business deals with money and receives a benefit from such activities within and outside of the United States on behalf of someone else, it is likely that a money transfer license is required.

The Requirement to Obtain a Money Transfer License

Whether an individual or business needs a money transfer license depends on whether they are classified as a money service business (MSB). It is crucial to consult state laws to determine if a business model falls under the definition of an MSB.

In most cases, if an individual or business receives money to transmit it to another location, they are considered an MSB and are required to obtain a money transfer license. Additionally, if money is transferred through fax, wire, a payment gateway, or other means, the business is also considered an MSB.

Do Digital Currency Transmitters Require an MTL?

The requirement for a money transfer license for digital currency transmitters depends on the country in which the business operates. In the United States, an MSB may need to hold an MTL if the company operates in the cryptocurrency space.

While some countries exempt MSBs involved in the crypto space from obtaining a money transfer license, many do not. Similarly, in the United States, only a few states offer this exemption. Therefore, it is crucial to consult state laws to determine if a business is exempt from licensing or not.