// GLOSSARY -- PAYMENTS & FINTECH

What is Money Transmission?

1 min read Updated

Money transmission is the regulated activity of transferring funds on behalf of others — requiring licenses in most jurisdictions and a key compliance consideration for crypto businesses handling user funds.

WHY IT MATTERS

Money transmission regulations are the legal framework that crypto companies most frequently encounter. If you receive crypto from user A and send it to user B, you may be a money transmitter — requiring state licenses (in the US), registration with FinCEN, and compliance with AML/KYC requirements.

The regulatory landscape is complex: each US state has different licensing requirements (money transmitter licenses or MTLs). Some states have crypto-specific frameworks. Federal registration with FinCEN is additionally required.

Many crypto business models require careful legal analysis: is this custody? Is this money transmission? The answers determine which licenses you need and which regulations apply.

FREQUENTLY ASKED QUESTIONS

Do DeFi protocols need money transmission licenses?
This is actively debated. Smart contracts that operate without a controlling entity arguably aren't 'transmitting money.' But regulators may focus on frontend operators, developers, or DAOs.
What is FinCEN?
The Financial Crimes Enforcement Network — the US federal agency that collects and analyzes financial transaction data. Crypto businesses operating as MSBs (Money Service Businesses) must register with FinCEN.
How do you get a money transmission license?
Apply state by state in the US (50 states = potentially 50 applications). Requirements include: capital requirements, surety bonds, background checks, and compliance programs. It typically takes 12-18 months and costs hundreds of thousands.

FURTHER READING

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