Part 2 of 4: Digital Assets and the Next Layer of Licensing Complexity
Framing the Problem: When “Money Transmission” Is Not Enough

In Part 1 of our four part series, Fastest Route to Market: Money Transmission Licensing Roadmaps for FinTechs, we explained why many early‑stage FinTech’s begin with federal Money Services Business (MSB) registration and state money transmitter licensing as the foundational framework for moving, holding, and managing customer fiat balances. For many payments, remittance, and wallet businesses, that structure can remain the primary regulatory lane for a long time. For digital asset businesses, however, MSB status and money transmitter licenses are often necessary but not sufficient.

Once a product involves digital assets whether as a medium of exchange, a store of value, or the rails for a broader transaction or settlement system the regulatory analysis stops being one‑dimensional. The same activity that can be described generically as “money transmission” may look very different when the “money or monetary value” in question is a stablecoin, a tokenized asset, or a crypto‑denominated claim on a third party. That functional reality is what brings securities, commodities, and bespoke state virtual currency regimes into the conversation.

Part 2 of this series focuses on that additional layer of complexity. The central question is how to build on an MSB and state money transmitter foundation as product features evolve. For founders, that means understanding when a digital asset product can remain in the non‑bank money transmission lane, when it starts to resemble securities or derivatives activity, and when state‑specific virtual currency licenses or approvals become gating items for launch.

Step One: Translate the Digital Asset Product into Regulatory Functions

The first analytic move in the digital asset context is the same one described in Part 1: strip away branding and restate the product in terms of its regulated activities. Labels such as “wallet,” “exchange,” or “DeFi platform” do very little work from a regulatory perspective.¹ What matters is what the system actually does, how assets move, and who exercises control at each step.²

In the digital asset space, this translation exercise requires a higher level of granularity than in traditional FinTech.³ Two platforms that look identical from a user interface perspective may present entirely different regulatory profiles depending on custody structure, transaction validation mechanics, and allocation of control over assets.⁴ A front end that appears to offer “simple transfers” could, under the hood, involve unilateral control by the platform, shared control through smart contracts, or fully user-directed transactions all of which map differently onto existing regulatory frameworks.⁵

A custodial wallet holding stablecoins on behalf of customers, for example, may involve the receipt and transmission of “monetary value” under the Bank Secrecy Act and state money transmission laws.⁶ At the same time, it raises threshold classification questions about the underlying asset: whether the stablecoin is treated as stored value, a security, a commodity, or a payment instrument under emerging federal legislation.⁷ A non-custodial wallet, by contrast, may fall outside traditional money transmission definitions if users retain exclusive control over their private keys.⁸ But even there, design choices such as integrated swapping functionality, routing logic, or fee extraction can reintroduce regulatory touchpoints, particularly in the AML and sanctions context.⁹

A practical way to begin is to break down each core product flow and ask three questions: who holds the private keys (if any), who can unilaterally move the asset, and on whose behalf is the activity conducted? These questions tend to drive the initial classification of the business as a money transmitter, broker, custodian, or software provider. From there, activities can be grouped into functional categories: (1) fiat transmission and stored value, (2) digital asset custody and transfer, (3) trading, matching, or order routing, and (4) issuance, redemption, or structuring of tokens. Each category brings its own regulatory consequences, and many platforms will sit across more than one.

Federal Baseline: MSB Status and Emerging Legislative Direction

At the federal level, most digital asset businesses still begin their analysis with FinCEN’s money services business (MSB) framework.¹⁰ FinCEN’s guidance on “administrators” and “exchangers” of convertible virtual currency continues to serve as the primary entry point for AML regulation, particularly for custodial wallets, exchanges, and payment platforms involving digital assets.¹¹ Registration as an MSB and implementation of a risk-based AML and sanctions compliance program remain foundational for a broad range of business models.¹² However, the federal analysis does not stop at FinCEN.¹³ Once digital assets are involved, additional regulatory regimes come into view, often simultaneously.¹⁴ The threshold question becomes whether any of the assets or activities implicate securities laws, commodities regulation, or newer, asset-specific legislative frameworks that are beginning to take shape.¹⁵

Recent federal legislative efforts reflect an increasing attempt to formalize this landscape. Stablecoin-focused proposals, including iterations of the GENIUS Act, aim to establish clearer requirements around issuance, reserves, and permissible activities for payment stablecoins.¹⁶ At the same time, broader market structure proposals such as the CLARITY Act seek to delineate the respective roles of the SEC and CFTC in overseeing digital asset markets, including distinctions between securities and commodities in tokenized form.¹⁷ While these proposals remain in flux, they are directionally important: they suggest a movement away from purely enforcement-driven regulation toward more prescriptive frameworks.¹⁸ In parallel, existing agency jurisdiction continues to apply.¹⁹ The SEC has maintained its position that many digital assets may qualify as securities depending on their structure and distribution, bringing offering, trading, and intermediary activities within its remit.²⁰ The CFTC, for its part, has consistently asserted jurisdiction over digital assets that qualify as commodities, particularly in the derivatives context, but also through its anti-fraud and anti-manipulation authority in spot markets.²¹

From a planning perspective, the key is not to resolve every classification question definitively at launch something that is often not possible but to identify which federal regimes are reasonably likely to apply based on current and near-term product functionality.²² That forward-looking assessment is critical, because product features introduced after launch can materially change the regulatory posture of the business.²³

Securities and Commodities Overlays: Functional Triggers and Jurisdictional Edges

For digital asset platforms, the most consequential regulatory shift typically occurs when the business begins to resemble a market rather than a payment or custody system.²⁴ This is the point at which securities and commodities overlays become central rather than peripheral.²⁵ If a platform facilitates trading in tokens that are securities or tokenized versions of traditional instruments such as equity, debt, or fund interests it may fall within the scope of broker-dealer regulation.²⁶ Depending on how trading is conducted, it may also need to register as an alternative trading system (ATS) or a national securities exchange.²⁷ These frameworks introduce a substantially different compliance burden, including requirements related to capital, governance, trade surveillance, best execution, and supervisory controls.²⁸

At the same time, the CFTC’s jurisdiction becomes particularly relevant where a platform offers derivatives, leveraged trading, or margined transactions involving digital assets.²⁹ In those cases, the platform may need to consider registration as a futures commission merchant (FCM), designated contract market (DCM), or swap execution facility (SEF), depending on the product structure.³⁰ Even absent derivatives, the CFTC retains enforcement authority over fraud and manipulation in spot commodity markets, which has implications for platform conduct and market integrity controls.³¹ The boundary between these regimes is not always clear, and in some cases, activities may implicate both.³² This is especially true where tokens exhibit characteristics of both investment contracts and commodities, or where platforms offer a mix of spot and derivative products.³³ As a result, the analysis is less about placing the business neatly into a single category and more about understanding where overlapping obligations may arise.³⁴

Importantly, relatively small product decisions can trigger these overlays.³⁵ Introducing an order book, enabling peer-to-peer matching, incorporating routing logic that affects execution, offering yield or staking-like returns, or allowing leverage can all shift the platform’s regulatory profile.³⁶ These features are often added incrementally, but their regulatory impact is rarely incremental.³⁷

State Virtual Currency Regimes: Layered and Divergent Approaches

At the state level, digital asset regulation builds on, but does not simply mirror, traditional money transmission frameworks.³⁸ While many states treat virtual currency as “monetary value” under existing statutes, others have modified their laws or adopted standalone regimes to address digital asset activity more directly.³⁹

New York’s BitLicense remains the most prominent example of a purpose-built virtual currency framework.⁴⁰ It applies to entities engaged in “virtual currency business activity” involving New York or New York residents and imposes detailed requirements across compliance, cybersecurity, capital, custody, and reporting.⁴¹ In practice, it operates alongside New York’s money transmission licensing regime, creating a dual set of considerations for many businesses. Outside of New York, approaches vary significantly.⁴² Some states have clarified that certain non-custodial activities fall outside the scope of money transmission.⁴³ Others have introduced tailored definitions of virtual currency or limited-purpose licensing regimes.⁴⁴ A smaller number have explored sandbox-style programs or special-purpose charters for digital asset firms.⁴⁵

The result is a patchwork in which both the applicability of licensure and the substance of regulatory expectations can vary by jurisdiction.⁴⁶ For digital asset businesses, this means that state analysis is not simply a matter of mapping traditional money transmission requirements, but also identifying where virtual currency-specific rules, exemptions, or interpretive positions may alter the overall compliance strategy.⁴⁷

Mapping Business Models to Regulatory Paths

Although each digital asset business presents unique features, several recurring archetypes help illustrate how these regulatory layers come together in practice.⁴⁸ A custodial stablecoin wallet focused on payments will typically implicate MSB requirements and state money transmission laws, with additional complexity driven by how the stablecoin is issued, backed, and redeemed.⁴⁹ As federal stablecoin legislation continues to develop, these models may also be subject to more explicit requirements around reserves, disclosures, and permissible activities.⁵⁰ A digital asset trading platform often begins within an MSB framework but must continuously assess whether listed assets are securities and whether trading functionality triggers broker-dealer, ATS, or exchange requirements.⁵¹ The addition of derivatives or leverage introduces a parallel track of CFTC regulation, often requiring a fundamentally different compliance infrastructure.⁵²

A tokenization platform that creates digital representations of real-world assets or financial interests may fall squarely within securities regulation from the outset.⁵³ In those cases, the regulatory pathway may resemble traditional capital markets infrastructure, with broker-dealer, ATS, or transfer agent considerations layered on top of any custody or transmission elements.⁵⁴ Across all of these models, the common thread is that early design decisions particularly around custody, trading functionality, and asset characteristics have outsized regulatory consequences.⁵⁵

Navigating an Evolving and Overlapping Framework

The digital asset regulatory landscape remains dynamic, with overlapping jurisdictional claims, ongoing enforcement activity, and active legislative development at the federal level.⁵⁶ In that environment, the goal is not to eliminate uncertainty, but to manage it through structured analysis and deliberate sequencing.⁵⁷ A disciplined approach begins with a clear functional breakdown of the product, builds a baseline around AML and money transmission where applicable, and then evaluates securities, commodities, and virtual currency-specific regimes as distinct but potentially overlapping layers.⁵⁸ Product development should proceed with an understanding of how new features may expand the regulatory footprint, particularly where they introduce market-like characteristics.⁵⁹

Against that backdrop, the practical task for founders is not to predict every future rule, but to choose a regulatory lane that can absorb change without constant re‑papering. The aim is a roadmap that can accommodate new products, counterparties, and licensing options over time, rather than a one‑off answer tied to a single launch configuration. Taken together, this framework is meant to help founders organize the moving pieces of digital asset regulation into a coherent, repeatable playbook rather than a one‑off launch checklist. It is designed to show how money transmission, securities, commodities, and state virtual currency regimes can be layered in a way that matches the actual mechanics of the product and the sequence in which new features are introduced.

Building on that foundation, Part 3 will turn to the role of sponsor banks and banking‑as‑a‑service arrangements how they can be used to plug a digital asset business into the traditional payments system and support launch without rebuilding the entire regulatory stack in‑house. Part 4 will then examine when it may make sense to move beyond that sponsor‑bank model into a specialized charter and how to approach that transition without locking the company into the wrong long‑term regulatory lane.

Thinking about your own licensing roadmap? Every FinTech’s path to market turns on the specifics: your product structure, target states, projected transaction volume, and available runway. Contact us to schedule a licensing roadmap consultation and get a clear, sequenced picture of what your regulatory path looks like from Day One.

Taft’s FinTech Practice is composed of attorneys specializing in crypto and digital assets, blockchain, financial services, banking, securities, bankruptcy,, government investigations, intellectual property, litigation, public policy, tax, technology, transactional, and regulatory issues that serve clients across the FinTech space.

This article is intended for general informational purposes only and does not constitute legal advice. Licensing requirements vary by jurisdiction and business model. Consult qualified legal counsel before making regulatory filing decisions.

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¹ Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies, FIN‑2013‑G001 (Mar. 18, 2013).
² 31 C.F.R. § 1010.100(ff)(5)(i)–(ii).
³ Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Securities Act Release No. 33‑11412, Exchange Act Release No. 34‑105020, 91 Fed. Reg. 20,415 (Mar. 23, 2026).
⁴ Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies, FIN‑2019‑G001 (May 9, 2019).
⁵ Id.
⁶ 31 C.F.R. § 1010.100(ff)(5)(i)–(ii).
⁷ Crypto Assets Interpretation, supra note 3.
⁸ Application of FinCEN’s Regulations to Virtual Currency Mining Operations, FIN‑2014‑R001, at 2–3 (Jan. 30, 2014).
⁹ FIN‑2019‑G001, supra note 4.
¹⁰ Id.
¹¹ Application of FinCEN’s Regulations, supra note 1.
¹² 31 U.S.C. § 5330; 31 C.F.R. § 1022.210.
¹³ 15 U.S.C. §§ 77a–77aa, 78a–78qq; 7 U.S.C. §§ 1–27f.
¹⁴ Id.
¹⁵ Id.
¹⁶ H.R. 4766, 118th Cong. (2023) (Clarity for Payment Stablecoins Act of 2023).
¹⁷ H.R. 4763, 118th Cong. (2023) (Financial Innovation and Technology for the 21st Century Act).
¹⁸ Id.
¹⁹ Id.
²⁰ 15 U.S.C. §§ 77b(a)(1), 78c(a)(10); 7 U.S.C. § 1a(9).
²¹ Crypto Assets Interpretation, supra note 3.
²² 7 U.S.C. § 9(1), (3).
²³ Id.; Crypto Assets Interpretation, supra note 3.
²⁴ 15 U.S.C. § 78c(a)(1); 17 C.F.R. § 242.300(a).
²⁵ 15 U.S.C. §§ 78e, 78o; 7 U.S.C. §§ 2(a)(1)(A), 6d, 7.
²⁶ 15 U.S.C. § 78o(a)(1); 15 U.S.C. § 78c(a)(10).
²⁷ 15 U.S.C. § 78e; 17 C.F.R. § 242.300(a).
²⁸ 15 U.S.C. §§ 78o(c)(3), 78o–3(b)(6); 17 C.F.R. §§ 240.15c3‑1, 242.301.
²⁹ 7 U.S.C. §§ 2(a)(1)(A), 6a, 6c.
³⁰ 7 U.S.C. §§ 6d, 7, 7b‑3; 17 C.F.R. pts. 37, 38.
³¹ 7 U.S.C. § 9(1), (3).
³² See generally 15 U.S.C. §§ 77a–77aa, 78a–78qq; 7 U.S.C. §§ 1–27f.
³³ See 15 U.S.C. § 77b(a)(1); 7 U.S.C. § 1a(9).
³⁴ See generally 15 U.S.C. §§ 77a–77aa, 78a–78qq; 7 U.S.C. §§ 1–27f.
³⁵ Crypto Assets Interpretation, supra note 3, at 20,417–18.
³⁶ 17 C.F.R. § 242.300(a); Crypto Assets Interpretation, supra note 3, at 20,417–18.
³⁷ Id.
³⁸ Conf. of State Bank Sup’rs, Model Money Transmission Modernization Act § 102(14)–(15) (2021).
³⁹ See, e.g., id. § 102(15); N.Y. Comp. Codes R. & Regs. tit. 23, pt. 200; Cal. Fin. Code §§ 3100–3290.
⁴⁰ N.Y. Comp. Codes R. & Regs. tit. 23, pt. 200.
⁴¹ Id. §§ 200.2(q), 200.3–.17.
⁴² Id. § 200.3; N.Y. Banking Law §§ 640–652.
⁴³ See, e.g., Wyo. Stat. Ann. § 40‑22‑104(a)(vi).
⁴⁴ See, e.g., Cal. Fin. Code §§ 3100–3290; N.Y. Comp. Codes R. & Regs. tit. 23, pt. 200.
⁴⁵ See, e.g., Wyo. Stat. Ann. §§ 13‑12‑101–13‑12‑118.
⁴⁶ Conf. of State Bank Sup’rs, Model Money Transmission Modernization Act, supra note 28, prefatory note.
⁴⁷ Id. § 102(15); N.Y. Comp. Codes R. & Regs. tit. 23, pt. 200.
⁴⁸ FIN‑2019‑G001, supra note 4.
⁴⁹ 31 C.F.R. § 1010.100(ff)(5)(i)–(ii); H.R. 4766, 118th Cong. (2023) (Clarity for Payment Stablecoins Act of 2023).
⁵⁰ H.R. 4766, 118th Cong. (2023) (Clarity for Payment Stablecoins Act of 2023).
⁵¹ FIN‑2019‑G001, supra note 4; 15 U.S.C. § 78o(a)(1); 15 U.S.C. § 78e.
⁵² 7 U.S.C. §§ 2(a)(1)(A), 6d, 7, 7b‑3.
⁵³ 15 U.S.C. § 77b(a)(1); Crypto Assets Interpretation, supra note 3.
⁵⁴ 15 U.S.C. §§ 78o(a)(1), 78q‑1; 17 C.F.R. § 242.300(a).
⁵⁵ Crypto Assets Interpretation, supra note 3.
⁵⁶ Id.
⁵⁷ Id.
⁵⁸ Id.
⁵⁹ Id.