Unlicensed Money Transmission: When Crypto, Stablecoin and Payments Firms Need State Licences

A crypto, stablecoin or payments firm needs a state money transmitter licence in every state where it receives money or monetary value from a person in that state and promises to make it available somewhere else or later, unless a specific exemption applies. Many states expressly include virtual currency or reserve-backed stablecoins in that definition. In the first two months of 2026 alone, Georgia made final a cease and desist order against an unlicensed online virtual currency platform and Texas fined a kiosk operator for selling stablecoin without a licence. The federal offence of running an unlicensed money transmitting business, 18 U.S.C. 1960, applies on top.

This guide explains when the licensing requirement is triggered, what regulators did in 2026, and how to put the position right before an examiner, a licensing reviewer or a partner bank asks.

What counts as money transmission

There is no single national definition. Each state defines money transmission in its own statute, and 31 states had enacted the CSBS Money Transmission Modernization Act (MTMA) in full or in part as at September 2026, which has brought the wording closer together. The core test in most states has two parts:

• Receiving money or monetary value from a person in the state
• A promise to make that money or value available at a later time or a different place, or to send it on to someone else

The Texas Department of Banking described this test in its February 2026 order: money transmission services mean the receipt of money or monetary value by any means and a reciprocal promise to make money or monetary value available at a later time or different location. Texas law defines money transmission to include receiving money for transmission from a person located in Texas, which means an out-of-state or online business is caught where its customer is in the state.

At federal level, a money transmitter must register with FinCEN as a money services business regardless of transaction size. Registration does not authorise transmission. 18 U.S.C. 1960 makes it a crime to run a money transmitting business without a required state licence, without FinCEN registration, or that moves funds known to come from crime.

Does crypto and stablecoin activity count?

In many states, yes. The table shows how three state regimes have treated it in 2026.

The NMLS data shows how few crypto firms report as licensed money transmitters. According to the NMLS 2024 Money Services Businesses Report, 149 companies in NMLS carried on virtual currency exchanging and trading, but only 15 reported virtual currency exchange and transmission volume on the MSB Call Report, totalling about USD 65.3 billion.

Activities that commonly trigger licensing include buying and selling virtual currency for customers, custodial wallets that hold customer value, crypto kiosks, stablecoin purchase and redemption for customers, and fiat on-ramps and off-ramps. Purely non-custodial software, where the firm never controls customer value, is treated differently in many states, but the analysis turns on the facts and on each state's wording.

Stablecoins and the GENIUS Act

The GENIUS Act, signed on 18 July 2025, takes effect on 18 January 2027, unless federal regulators issue final implementing rules earlier, in which case it takes effect 120 days after those rules. It creates a licensing regime for payment stablecoin issuers, with a federal route and a state-qualified route. From 18 July 2028 it will be unlawful for a digital asset service provider to offer or sell to a person in the United States a payment stablecoin not issued by a permitted issuer.

Firms that buy, sell, hold or transfer stablecoins for customers should not assume the Act replaces state money transmission licensing for their own activity. The Texas order shows a state treating sales of a reserve-backed stablecoin as money transmission under existing state law. For licensed firms holding stablecoins, the CSBS March 2026 guidance on tangible net worth confirms that on-balance-sheet, fiat-backed stablecoins redeemable at par count as tangible assets.

What state regulators did in 2026

The firms neither admitted nor denied the findings in the consent orders. The Georgia order, the Washington order and the Texas order are published by each regulator.

Two lessons stand out. First, the Texas matter was found by the regulator while it reviewed the firm's own licence application, filed in May 2024. A licence application is a full disclosure exercise, and activity outside the perimeter tends to surface during it. Second, CoinFlip had already entered a 2023 Texas consent order for unlicensed stablecoin transactions through its kiosks, with a USD 31,600 penalty. A second matter cost more.

The Washington order shows that holding a licence is the start, not the end. Licensed firms are expected to keep net worth, bonds and reporting in order; our guides to the NMLS annual renewal and the MSB Call Report cover those duties.

Federal exposure for online and overseas firms

State licensing is only half of the picture. Three federal points apply to crypto and payments firms serving US customers from anywhere:

• No size threshold for money transmitters. FinCEN's USD 1,000 per person per day threshold applies to some money services categories, such as currency exchange, but not to money transmission. A single transfer can bring a business within the definition.
• Foreign-located businesses must register. A business outside the United States doing business wholly or in substantial part in the United States as a money services business must register with FinCEN, appoint a US agent to accept legal process and keep its records available, under 31 C.F.R. 1022.380.
• Registration must be kept current. Form 107 is renewed every two calendar years and refiled within 180 days of certain ownership changes. A lapsed registration is itself a ground under 18 U.S.C. 1960.

FinCEN counted approximately 24,856 active money services business principals at the end of 2025. Registration with FinCEN is quick and free; it is the state licences, each with its own net worth, surety bond and permissible investment rules, that take time. That is why the state perimeter should be settled before customers are onboarded, not after.

How unlicensed activity usually comes to light

• A licence application. Applicants describe their business, affiliates and history. Regulators compare that with what the firm has already been doing in the state.
• Customer complaints. A complaint to a state regulator about a lost or delayed transfer prompts the question of who was licensed to make it.
• Partner banks and payment partners. Banks that hold customer funds for money transmission firms ask for licence evidence at onboarding and at periodic review, and a gap can end the relationship.
• Examinations of a licensed affiliate or partner. Examiners follow flows of funds to related companies, as the Texas affiliate matter shows.
• Investors and acquirers. Due diligence before a funding round or acquisition tests licensing state by state.

How to regularise before someone asks

The aim is to stop the exposure growing, establish the facts and choose a lawful route in each state. The usual sequence is:

1. Map the activity by state. Identify where customers are located, what the firm receives from them, who controls the funds and when the obligation ends.
2. Analyse each state's definition and exemptions. Agent-of-payee, payroll and other exemptions differ, and some states will confirm an exemption on request.
3. Restrict or stop the activity in states where a licence is needed and none is held, for example by blocking new customers from that state or moving the regulated step to a licensed partner.
4. Choose the route in each state, using the options below.
5. Register with FinCEN if not already registered, and bring the anti-money laundering programme up to the standard in 31 C.F.R. 1022.210.
6. Prepare full and accurate disclosure for the licence applications. Regulators expect candour about past activity, and the orders above show inconsistent accounts are treated more seriously than the original gap.

Regulatory Counsel advises crypto, stablecoin and payment firms on state perimeter analysis and multistate US money transmitter licence programmes through its licensing service, and supports licensed firms through ongoing compliance support. Our cryptoassets and money services businesses pages set out the wider regimes.