USA Crypto License

Nowadays we can see how fast and crazy our universe is changing, so as financial world with it. We can see the transfer from the world of traditional currencies to crypto almost everyday even from the White House media now. Of course, such interest and redevelopment of the world creates new opportunities for businesses wishes to operate in the US or for US residents. US market for the last 50-70 years was very attractive to any business and if the business is connected to the financial markets – especially. So, we’d love to read our explanatory article on the crypto currencies or VASP activities regulation in the US.

Defining Crypto Licensing in the U.S.

The U.S. VASP (Virtual assets services providers) is mainly regulated and licensed at two separate levels:

1. Federal Level: Regulated by institutions like the Securities and Exchange Commission (SEC), Financial Crimes Enforcement Network (FinCEN), and the Commodity Futures Trading Commission (CFTC). In other simple words SEC and CFTC plays crucial role when You or Your business wants to deal with crypto currencies that has features of Security or Commodity and here our team can be helpful to identify whether You need those guys to register Your token or business, as the fines of working without license or registration are way too significant. Also, FinCEN is over watching any money related business, and almost every project must obtain an MSB registration to work in the US as a stage one of compliance, after registering appropriate company, of course. 
2. State Level: Almost every state by the time of this article has their own licensing requirements for cryptocurrency businesses, usually it is so called MTL explained further, where we must show the regulator that Your business is real, can be trusted, know how to organise processes connected to the clients crypto or fiat currency, safeguarded and compliant.

Federal Licensing Requirements

At the federal level, cryptocurrency businesses have to comply with anti-money laundering (AML) and know-your-customer (KYC) laws. The main federal requirements include:

1. Money Transmitter License (MTL) within the appropriate state regulator:
   Companies and businesses that deals with the cryptocurrency transactions for customers (e.g., exchanges or wallets, custodies, etc.) are often considered “money transmitters” within the state and must register with the state regulator through special NMLS system. This license requires businesses to implement AML programs, file reports on suspicious activities, and maintain transaction records, as well as show the real business cash flows or projections, fit and proper status of the management, the team and ways of safeguarding customers information and finances.

2. SEC and CFTC Oversight: Those guys are relevant for Your business if You want or work with securities and commodities, even if those are tokens with features of the both or any of them. So, if it is about Your business, congratulations, we must be additionally governed by the SEC and CFTC. Token offerings and Initial Coin Offerings (ICOs) may fall under the SEC’s jurisdiction if they meet the Howey Test, which determines whether an asset is a security. It’s highly advised to check if You have to be registered before provision of the activity, it won’t take much of Your budget, but fines and liabilities can.

3. Bank Secrecy Act (BSA) Compliance: Cryptocurrency businesses, as MSB registered companies must follow BSA Act obligations to watch, identify and report financial crimes. Compliance with BSA Act includes close watch of all the transactions, identification of the risk level, based on that reporting. So, basically you must know everything legally asked about Your client, Your clients business, transactions and nature of wealth.

State-Level Licensing Requirements

State regulations is different and complicated, and while several states have showed specific cryptocurrency licensing requirements, other add it to the existent licenses and only really few still considering regulation. Businesses need to be compliant and licensed in each state they operate in. Below are just some of the most popular state-level licenses, if You’d like to know others – You are more than welcome to our personal consultation free of charge:

1. New York BitLicense:
   New York is one of the most strict regulated states for cryptocurrency businesses. The BitLicense, issued by the New York Department of Financial Services (NYDFS), it requires  companies involved in VASP activities, including transmission, custody/storage, or exchanging cryptocurrency. Businesses must meet strict KYC, AML, Financial and personal profile and cybersecurity standards to obtain a BitLicense.

2. California Money Transmission Act (MTA):
   California does not have a cryptocurrency-specific license like New York yet, but requires businesses engaging in VASP activities to register under the Money Transmission Act. This act is connected to companies offering crypto exchanges, custody or money transfer services.

3. Other State Requirements:
   While not all states have full and integrated cryptocurrency regulations, several are moving toward implementing their own licensing frameworks. States like Texas, Wyoming, and Florida have their own ways to obtain MTL license with the feature of virtual assets services. 

Why Crypto Licenses Matter for Your Business

Operating without the necessary crypto licenses can result in huge responsibilities, including fines, criminal charges, and business closure. Obtaining a license allows your businesses to:

• Gain customer trust: Compliance with regulations and license itself just screams to the customers that your business is legitimate and safe and they can trust You their hard earned finances.
• Attract institutional investors: Institutional investors works only with fully compliant businesses that follow regulatory standards, improving opportunities for growth and investment.
• Avoid penalties: Non-compliance with federal and state laws will certainly lead to huge fines, lawsuits, or even jail time for executives – which is always a bad idea.
• Expand into new markets: Meeting regulatory standards in even some states will show the whole nation that Your business is trustworthy and it has even benefits among international regulators and customers.

How Legal Support Can Help You get the right Crypto License for Your business

Obtaining crypto licenses is a complex, multi-step process that requires legal expertise. Legal professionals can assist with:

• Decide what license do You need, if You really need one
• Preparing license applications and apply: Often those applications are very complicated and You need to do everything right at firs, as the application fee often is significant.
• Developing compliance programs and internal regulations: AML/KYC policies drafted by AI won’t work here, as the right AML policy is usually about 70 pages and should be individually written to Your business, and it’s just one of many documents.
• Responding to regulatory inquiries: There is always communication between You and regulator and it is critical for the person that communicates on behalf of Your business to know the staff very well, otherwise regulator won’t treat Your business and application seriously.

Conclusion

US already implemented the specific regulations for all kinds of crypto related businesses and activities. The process is divided to 2 or sometimes 3-4 licenses and regulations, one of which is individual for every state. The applications are available publicly, but it’s highly advised to hire compliance guru to identify needed licenses, draft policies and other documents, fill out applications and provide professional communication with the regulator until the license is granted.