Money-transmission laws address whether a business accepts money or other value from one person and transmits it to another person or location. Under FinCEN’s virtual-currency guidance, value that substitutes for currency can include convertible virtual currency. FinCEN generally treats administrators and exchangers that accept and transmit convertible virtual currency as money transmitters unless an exemption or limitation applies. A person merely using virtual currency to buy goods or services is treated differently.
A company may therefore face three separate questions:
- Is it issuing a payment stablecoin and required to become a permitted payment stablecoin issuer?
- Is it an MSB subject to federal Bank Secrecy Act requirements and FinCEN registration?
- Does it need licenses under the laws of the states where it conducts business or serves customers?
Satisfying one layer does not automatically satisfy the others. FinCEN registration is a federal registration, not a nationwide state license.
What the $GENIUS Act preempts—and what remains unresolved
The Act contains meaningful state-law preemption, but its scope matters. Under 12 U.S.C. § 5904(h), state charter, license, or other authorization requirements are preempted with respect to a federal qualified payment stablecoin issuer, or an approved subsidiary of an insured depository institution or credit union, that becomes a permitted payment stablecoin issuer.
That protection applies to an approved issuer. It does not say that every exchange, distributor, wallet, payment company, affiliate, or contractor working with the issuer is exempt from state licensing. Nor should businesses assume that it covers every additional activity an issuer might conduct.
The OCC recognized those unresolved boundaries in its October 2026 final $GENIUS Act rule. Commenters requested clarification about preemption for third-party service providers and issuers conducting additional activities. The OCC declined to adopt a general interpretation, explaining that some issues should be evaluated individually as particular facts arise.
The rule also addresses the need for independent legal authority for additional digital-asset services. The OCC would not declare all wallet or money-transmission activity permissible based only on issuer status. Issuance and redemption are permissible issuer activities, while broader services require closer examination. The OCC’s implementation bulletin identifies January 18, 2027 as the effective date of both the Act and its principal OCC rule; these future protections do not justify abandoning existing licensing obligations today.
State-qualified issuers follow a different structure. Under 12 U.S.C. § 5906, qualifying issuers operating under a certified state regime receive protection from duplicative host-state issuer licensing, subject to statutory conditions. Home-state law may govern certain activities in other states. The Act nevertheless preserves applicable state consumer-protection laws and common-law remedies.
A separate provision, 12 U.S.C. § 5915(d), permits qualifying state-chartered depository institutions to conduct money transmission or custody through a permitted-issuer subsidiary across state lines, subject to capital and liquidity conditions. Host-state consumer-protection oversight remains relevant. That pathway should not be generalized to nonbank fintechs.
How the analysis applies to common stablecoin businesses
For an exchange, the central questions include whether it buys, sells, converts, holds, or transmits stablecoins for customers. The fact that another company issues the token does not resolve the platform’s own regulatory status.
Hosted wallets similarly require examination of custody and transfer functions. A provider that controls customer assets and sends them to destinations selected by customers presents different facts from a company that merely distributes software. Kelman PLLC’s article on noncustodial crypto businesses and money transmitter licensing explains how recovery authority, integrated swaps, and administrative controls can affect that analysis.
For remittance businesses, replacing a conventional settlement method with stablecoins generally does not change the underlying function: accepting value from a sender and arranging delivery to a recipient. Counsel should examine the entire transaction, including fiat collection, token conversion, cross-border transfers, and local payout.
Payment processors should be particularly careful about exemptions. In its payment-processor administrative ruling, FinCEN identified conditions including payment for goods or services, use of a clearance and settlement system admitting only BSA-regulated financial institutions, and an appropriate agreement with the seller or creditor.
Consider a processor that collects stablecoins into a wallet it controls, deducts a fee, and sends the balance to merchants. That arrangement requires a different analysis from checkout software that displays a merchant’s wallet address while the customer pays the merchant directly. A merchant agreement alone does not establish the federal exemption, and public-blockchain settlement requires particular attention to the clearance-and-settlement condition.
State licensing requires its own analysis
State statutes do not use identical definitions, exclusions, or exemptions. Some states regulate virtual-currency activity through money-transmission laws; others maintain separate digital-asset licensing regimes.
New York illustrates the distinction. The Department of Financial Services’ virtual-currency licensing guidance explains that many stablecoins fall within the BitLicense regulation. A business conducting virtual-currency activities and transmitting fiat may need both a BitLicense and an Article 13-B money transmitter license. A New York limited-purpose trust company may have broader authority. DFS also confirms that FinCEN registration does not determine whether a BitLicense is required.
Businesses should therefore assess each activity in each relevant jurisdiction. A partner agreement should identify the licensed entity, its authorized services, the company’s own role, and any conditions supporting an exemption. Describing a relationship as a partnership or agency arrangement does not, by itself, resolve licensing.
FinCEN requirements are also changing
Under 12 U.S.C. § 5903(a)(5), permitted payment stablecoin issuers will be treated as financial institutions under the Bank Secrecy Act. The statute addresses AML programs, recordkeeping, suspicious-transaction monitoring, customer identification, due diligence, sanctions compliance, and transaction-blocking capabilities.
As of November 3, 2026, FinCEN’s specialized AML and sanctions rule for permitted issuers and the agencies’ customer-identification rule remain proposals. They should inform planning without being described as effective final requirements. Existing BSA obligations continue to require attention while the issuer-specific framework is completed.
A useful review begins with transaction diagrams, wallet permissions, customer agreements, and provider contracts. Identify who receives value, directs transfers, converts assets, and bears responsibility when settlement fails. Then assess federal MSB status, state licensing, and issuer approval separately.
Frequently asked questions
Does partnering with a regulated issuer eliminate our licensing requirements?Not automatically. A separate platform that accepts, exchanges, holds, or transmits customer assets needs its own analysis.
Does FinCEN registration replace state licenses?No. Federal registration and state authorization address different requirements.
Does a noncustodial wallet need a license?The answer depends on its actual functions and controls. Software distribution differs from operating swaps, payments, custody, or settlement.
Can an existing MTL authorize issuance under the $GENIUS Act?An ordinary MTL does not automatically establish permitted payment stablecoin issuer status. Businesses must confirm the approvals required under the new framework.
Kelman PLLC advises digital-asset businesses on MSB, BSA, AML, and state licensing issues. Companies developing stablecoin payment, exchange, wallet, or remittance products can contact the firm to discuss how their transaction flows affect federal and state requirements.
Attorney Advertising. This article provides general information, not legal advice. Contacting the firm does not establish an attorney-client relationship. This article provides general information, not legal advice. Contacting the firm does not establish an attorney-client relationship.
