Interpretive Guidance

Interpretive guidance is material published by a regulator or supervisory agency to explain how it understands an existing statute or regulation and how it expects that rule to apply to particular facts. It does not create new legal duties; instead it tells firms how the agency reads duties that already exist. Payment companies, banks, money transmitters and crypto businesses rely on it heavily, because the underlying laws were often written before the products they now offer existed.

Guidance sits between formal rules, which go through a public consultation and carry the force of law, and private advice, which binds no one but the parties involved. It comes in many forms: guidance notes, frequently asked questions, administrative rulings, interpretive letters and supervisory statements. It is often confused with a no-action letter, which is a promise not to take enforcement action against one firm rather than a general reading of the law.

The label varies by country and agency, but most interpretive material falls into a few recognisable groups:

• General guidance documents. Papers that explain how a law applies to a category of business, such as a regulator's view of when a crypto wallet provider is transmitting money.
• Questions and answers. Running lists of short answers to questions raised by the industry, updated as new issues appear.
• Administrative rulings and letters. Responses to a named firm's request about its own business model, usually published in redacted form so others can learn from them.
• Manuals and handbooks. Consolidated texts that set out the agency's reading of an entire regime, such as the UK Financial Conduct Authority's Perimeter Guidance manual (PERG).

Examination manuals and supervisory expectations, which describe how an agency will test compliance, are closely related and are often read in the same way.

Much of the modern payments and anti-money laundering landscape has been shaped by guidance rather than new legislation. In the United States, FinCEN has used guidance and administrative rulings for years to explain when a business counts as a money services business. Its May 2019 guidance on convertible virtual currencies consolidated earlier rulings and set out how the money transmission rules apply to wallets, exchanges and other crypto business models.

Bank regulators do the same. The Office of the Comptroller of the Currency issued a series of interpretive letters from 2020 on whether national banks may provide crypto custody and hold stablecoin reserves, and later clarified that banks should obtain supervisory non-objection before starting such activities. State regulators publish their own opinions on whether a model falls within the definition of a money transmitter.

In Europe, the European Banking Authority answers questions on the Second Payment Services Directive (PSD2) through a public Q&A tool, and national authorities such as the Financial Conduct Authority publish approach documents explaining how they supervise payment and e-money firms. These documents are central to deciding where the regulatory perimeter lies for a new product.

Interpretive guidance is generally not binding law. A court can disagree with an agency's reading, and a firm that follows guidance is not automatically protected if a court later finds that the statute means something else. In the United States, the Administrative Procedure Act exempts interpretive rules from the notice-and-comment process required for legislative rules, which is why agencies can issue them quickly, but this is also why they carry less weight.

The weight courts give to agency readings has changed over time. In 2024 the US Supreme Court, in Loper Bright Enterprises v. Raimondo, ended the practice of courts deferring to an agency's reasonable interpretation of an ambiguous statute, meaning courts now decide the best reading themselves. Agency guidance can still be persuasive, especially where it is consistent and well reasoned.

In practice, supervisors expect firms to follow their published guidance, and examiners use it when testing a compliance programme. Departing from it usually needs a documented legal analysis.

Compliance and legal teams use guidance in several ways. When designing a product, they map each feature against the relevant guidance to decide whether it is a licensable activity. When a question is genuinely new, a firm may ask the regulator for a ruling about its own facts, accepting that the answer will often be published. Guidance updates are also tracked through regulatory change management, because a new FAQ can change obligations as much as a new rule.

Critics argue that agencies sometimes use guidance to impose de facto rules without consultation, a practice often called regulation by guidance. Guidance can also be withdrawn or reversed when leadership changes, leaving firms that relied on it exposed, as happened with several statements on bank crypto activity. Finally, guidance from different agencies can conflict, so a business regulated at both federal and state level may need to reconcile readings that do not fully agree, particularly in areas such as cryptocurrency regulation.

• Financial Crimes Enforcement Network
• European Banking Authority