In today’s rapidly evolving financial landscape, regulating money services businesses has become increasingly complex. States are grappling with adapting their regulatory frameworks to keep pace with financial and technological innovations. In this blog post, we will explore the money transmitter regulations from the Uniform Money Services Act (UMSA) to the more recent Uniform Money Transmission Modernization Act (MTMA) and discuss the implications for the future of financial regulation for virtual currency in the United States. This posts expands on the work of the Blockchain Legislative Database (BLD) Project. Read more about the BLD Project here.
The Rise of New Financial Technologies
The financial services landscape dramatically transformed throughout the 2010s. Historically, money transmission was limited. The rise of companies like PayPal, Venmo, and later, cryptocurrency platforms revolutionized how we think about and use money. As financial services become more diverse and competitive, they have to navigate the various money service regulations.
The Uniform Money Service Act was drafted in 2000 to establish nationwide licensing requirements, consumer protection measures, and anti-money laundering protections. However, adoption was limited to only twelve states. The rapid pace of technological change led to a patchwork of regulation across states that challenged businesses trying to operate nationwide. This inconsistency among state regulations brought challenges to businesses regarding compliance and licensing complexities, inconsistent consumer protection and experiences, risk management challenges due to legal uncertainties, operation inefficiencies, and competitive disadvantages. States experienced constrained economic growth and a resource drain due to regulatory inconsistencies in the money services sector.
Enter the MTMA: A Modern Approach to Money Transmission Regulation
Recognizing the need for a more up-to-date and widely adopted regulatory framework, the Conference of State Bank Supervisors (CSBS) developed the Uniform Money Transmission Modernization Act (MTMA). This new model law builds on the foundations laid by UMSA while addressing the realities of modern financial services.
One of the most unique aspects of the MTMA is its approach to virtual currencies. The Act includes an optional Article XIII on “Virtual Currency,” providing a broad definition that encompasses cryptocurrencies without explicitly naming them. This flexible approach allows states to regulate virtual currency activities without getting bogged down in the rapidly changing specifics of cryptocurrency technology.
However, the problem remains that it is optional for states to include Article XIII on “Virtual Currency” when adopting the MTMA. While more states have adopted the MTMA than the UMSA, the problem is repeating itself with only sporadic and inconsistent adoption of virtual currency definitions and regulations.
The Current State of Adoption and Variation
The MTMA has gained more traction than the UMSA but still falls short of achieving nationwide regulatory consistency, particularly for virtual currency regulation. Currently, twenty-one states have fully enacted the MTMA, four have partially adopted it, and two are possibly implementing it. However, twenty-two states continue operating under their own state’s money transmission laws or lack specific regulations. This patchwork of adoption continues to create an inconsistent landscape of regulation across the country.
Some states, like New York, have established a comprehensive regulatory framework to regulate virtual currencies strongly. States like Wyoming and New Hampshire have chosen to entirely exempt virtual currencies from money transmitter regulations. Meanwhile, many states fall somewhere in between, either incorporating virtual currencies into existing money transmitter laws or providing limited guidance.
This continued variation between state regulations presents both challenges and opportunities. For businesses operating in the money services space, especially those dealing with virtual currencies, navigating this complex regulatory landscape will remain a challenge. The risk for operating in one state could be low while it is high in another for the same service. However, there are also opportunities for innovation and shaping the future financial regulations.
Looking to the Future: Virtual Currencies
The tension between the desire for regulatory uniformity and the need for flexibility to address local concerns and emerging technologies will continue to grow as technology innovations, money service businesses, and virtual currency evolve and grow. The MTMA represents a significant step towards harmonization, but its optional provisions and the continued existence of state-specific regulations ensure that variation will persist. More time and research will need to be spent on addressing virtual currency types and definitions, assessing consumer protection implications, evaluating business licensing requirements, and determining if there should be other regulatory approaches that do not fit traditional models.
About the author
Karisa Gingerich
2026 J.D. Candidate at the University of San Francisco
This project was written as part of the BLD Project.
