The Money Transmission Modernization Act (MTMA) is a model state law, drafted under the auspices of the Conference of State Bank Supervisors (CSBS), that sets out a single framework for licensing and supervising money transmitters in the United States. It covers definitions of regulated activity, exemptions, minimum capital, surety bonds, permissible investments, changes of control, reporting and supervision.
The MTMA has no legal force on its own. Money transmission in the US is licensed at state level, and the model only takes effect in a state once that state's legislature enacts it, in full or in part. Its purpose is to reduce the differences between state regimes so that a company holding many state licenses faces broadly the same rules in each.
Background
Almost every US state requires a money transmitter license (MTL) for businesses that receive money for transmission, sell payment instruments or issue stored value, but the statutes were written at different times and differ on definitions, net worth, bonding and what counts as control. An earlier model, the Uniform Money Services Act, was published by the Uniform Law Commission in 2000 and adopted by a minority of states. As payment companies and fintech firms began seeking licenses in nearly every state, the burden of complying with dozens of inconsistent regimes grew.
State regulators responded with a broader effort to coordinate licensing and examinations through CSBS and the Nationwide Multistate Licensing System (NMLS). The MTMA, approved by the CSBS board in 2021, is the legislative part of that effort. It was developed with input from the industry and has since been adopted, wholly or partly, by a large and growing number of states.
Main provisions of the Money Transmission Modernization Act
- Scope and exemptions. The act defines money transmission, payment instruments and stored value, and lists exemptions, including a codified exemption for operating as an agent of a payee in defined circumstances. Whether a given model is a licensable activity still depends on the facts and the enacting state's text.
- Net worth. Licensees must maintain a minimum tangible net worth that scales with the size of the business, replacing the fixed amounts that varied widely from state to state.
- Surety bond. A surety bond sized by reference to the licensee's transmission volume, within a floor and a cap.
- Permissible investments. Licensees must hold permissible investments at least equal to their outstanding money transmission obligations, and those assets are held in trust for customers if the licensee fails.
- Control. A uniform definition of control and of a control person, with a process for regulatory approval before a change of control takes place.
- Supervision. Provisions supporting multistate examinations, shared information between regulators, and reporting through NMLS.
Relationship with NMLS and federal rules
Licensing applications, amendments and periodic reports in states that use the MTMA are generally filed through NMLS, using the NMLS MU filings for the company and its control persons. The MTMA does not replace federal requirements. Money transmitters remain money services businesses under the Bank Secrecy Act, must register with FinCEN, and must maintain an AML program, regardless of which state law applies.
Adoption and limits
Each state decides whether to adopt the act and may change provisions when it does. Some states adopted it nearly word for word, others took only selected sections, and some had not adopted it as of the mid-2020s. New York, for example, licenses money transmitters under its own Banking Law and is supervised by the New York State Department of Financial Services, which also runs the separate BitLicense regime for virtual currency businesses. Wyoming went further for crypto firms by creating the special purpose depository institution (SPDI), a state bank charter that sits outside the money transmission framework altogether.
Because of this patchwork, the MTMA narrows but does not remove state-by-state differences. Applicants still need to check each state's enacted text, effective dates and transition rules. Operating without a required license remains a state offense and, in many cases, a federal crime under the rules on unlicensed money transmission.