Montana: The Lone State without MSB License Requirements

When it comes to financial regulations, the United States is a patchwork of federal and state laws. One area where this mosaic is particularly pronounced is in the realm of money services businesses (MSBs). Montana stands out as the only U.S. state that doesn’t require an MSB license on the state level. Here’s a look at the implications and reasoning behind Montana’s unique stance.

What is an MSB?
First, it’s essential to understand what an MSB is. The term “Money Services Business” encompasses a broad range of financial service providers that don’t quite fit into the traditional banking mold. This can include money transmitters, currency exchangers, and cryptocurrency-related services. Given their potential for misuse in money laundering or other illicit activities, many states have introduced stringent licensing requirements for MSBs on a state level to promote transparency and maintain consumer trust.

Montana’s Unique Stance
While every other state has imposed some sort of licensing requirement for MSBs, Montana remains an exception. This isn’t because Montana has lax regulations across the board; the state has its fair share of financial and business regulations. Instead, the decision seems to be a combination of Montana’s traditionally libertarian-leaning regulatory environment, a comparatively small market size for MSBs, and perhaps a different risk assessment than other states. It should be mentioned that a Montana MSB is still subject to regulation by the US Bank Secrecy Act (BSA) and needs to be registered with FINCEN as a AML/CFT regulated provider on the Federal level, just like any MSB from any other US state.

Attractive Environment for MSB Startups
Without the regulatory hurdles associated with obtaining a license on the state level, Montana may attract entrepreneurs looking to start or pilot an MSB. It provides a more accessible point of entry for those wishing to dip their toes into the financial services industry without entry requirements such as minimum capital limits. With extremely intricate regulation of for example cryptocurrencies coming up in other jurisdictions, such as the Markets in Crypto-Assets Regulation (MiCA) in Europe, we predict that Montana’s popularity as a jurisdiction for MSBs will only increase.

Interstate Operations:
For MSBs operating in multiple US states, the lack of a license requirement in Montana might not offer a significant advantage. These businesses would still need to obtain licenses in other states where they operate. We see the most demand for Montana MSBs from international clients who are offering services globally but without necessarily targeting any other specific jurisdiction in ways that would trigger regulation there, something that would defy the purpose of having established the Montana MSB in the first place.