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UNIKelman Law says noncustodial label alone does not settle money transmitter licensing
A law firm's analysis says crypto wallet and DeFi businesses must examine their actual control over assets and transaction flows to judge whether federal MSB rules or state licences such as New York's BitLicense apply.
Why it matters: The analysis sets out how US federal and state regulators may treat wallet, swap and payment features, a licensing question for crypto businesses building self-custody products.
Key points
- FinCEN's 2014 ruling FIN-2014-R002 says producing and distributing software does not by itself amount to accepting and transmitting value.
- California's Financial Code § 3102(c)(1) treats the power to block a transaction indefinitely as control, so an inability to move assets does not end the inquiry.
A law firm analysis says a noncustodial crypto business still needs to test whether it requires a money transmitter licence, because the label does not decide the question. Kelman Law, writing for Bitcoin.com News, says the answer turns on what a company actually does, how funds flow and how much authority it holds over assets.
At federal level the test is whether a business is a money services business under the Bank Secrecy Act and FinCEN rules, which can bring registration and a written anti-money laundering programme. State authorisation is separate: New York says FinCEN registration does not settle whether a BitLicense is needed. FinCEN's 2014 ruling found that distributing software alone does not amount to transmitting value, but adding hosted-wallet functions changes the analysis.
The firm says wallets offering swaps, merchant payments or DeFi features should be reviewed service by service, including who supplies liquidity and who settles. It also urges scrutiny of recovery tools and admin controls that could let a company move or block assets.
The analysis recommends documenting transaction diagrams, signing permissions and vendor contracts before launch, and revisiting them when products change. It notes FinCEN withdrew its proposed unhosted-wallet reporting rule on 6 October 2026, but says that withdrawal created no general licensing exemption.
Live updates on NewsFeeds:RegulationDesk editor: Keshav Aggarwal (accountable for this page; this summary was not edited by hand)
How this was produced: an AI model wrote this summary of Bitcoin.com News’s report, which we credit and link above. Read our Editorial and AI policy. Spotted a mistake? See Corrections.
Not investment advice. Read the risk disclaimer.