Money transmitter prudential standards
What are permissible investments for a money transmitter license?
Permissible investments are the asset types a state lets a licensed money transmitter count toward the liquidity it holds against customer money, and in states that have enacted the model law the licensee must hold permissible investments with a market value of not less than the aggregate amount of all of its outstanding money transmission obligations at all times.
What are permissible investments for a money transmitter license?
Permissible investments are the asset types a state lets a licensed money transmitter count toward the liquidity it holds against customer money, and in states that have enacted the model law the licensee must hold permissible investments with a market value of not less than the aggregate amount of all of its outstanding money transmission obligations at all times.
The test is one-to-one against outstanding obligations
Minnesota's enacted version of the model language requires a licensee to maintain at all times permissible investments having a market value computed in accordance with United States generally accepted accounting principles of not less than the aggregate amount of all of the licensee's outstanding money transmission obligations (Minn. Stat. 53B.61, paragraph (a)). Three parts of that sentence do the work. The measure is market value under US GAAP, not book value. The benchmark is outstanding obligations to customers, not revenue, assets, or transaction volume. And the obligation runs at all times, so a balance that only clears on the last day of a reporting period does not satisfy it.
What counts as a permissible investment
Minn. Stat. 53B.62, subdivision 1, lists the categories: cash and cash equivalents, including demand and savings deposits and funds held for the benefit of customers at a federally insured depository institution, items in transit, and money market mutual funds rated AAA or the equivalent; certificates of deposit or senior debt obligations of an insured depository institution; obligations of the United States or of a state or its subdivisions, agencies, or instrumentalities, and obligations fully guaranteed as to principal and interest by the United States; the full drawable amount of an irrevocable standby letter of credit naming the commissioner as beneficiary; and one hundred percent of the surety bond or deposit that exceeds the licensee's average daily money transmission liability in the state. The regulator can also limit how much of a specific holding counts, outside the cash category, where the holding carries undue risk to customers that its market value does not reflect (Minn. Stat. 53B.61, paragraph (b)).
The statutory trust is the reason the rule exists
Permissible investments, even when they are commingled with the licensee's other assets, are held in trust for the benefit of the purchasers and holders of the licensee's outstanding money transmission obligations if the licensee becomes insolvent, files or faces a bankruptcy or receivership petition, enters any other proceeding for dissolution or reorganization, or is pursued by a creditor who is not a beneficiary of that trust (Minn. Stat. 53B.61, paragraph (c)). That is the practical point of the whole framework: the assets are earmarked for customers ahead of general creditors, which is why regulators care about the category an asset falls into rather than simply the size of the balance sheet.
Letters of credit carry their own conditions
A letter of credit only counts if it meets the conditions the statute attaches to it (Minn. Stat. 53B.62, subdivision 2). It must be issued by a federally insured depository institution or a qualifying foreign bank, be irrevocable and unconditional, avoid reference to any other agreement or security interest, and automatically extend for another year unless the issuer notifies the commissioner in writing at least sixty days before an expiration date. If that notice of nonextension arrives, the licensee has to demonstrate to the regulator's satisfaction, fifteen days before expiration, that it will still meet the permissible investments test without the letter of credit.
How uniform this actually is
Less than the phrase model law suggests. CSBS reports thirty-one states enacted in full or in part, and notes that uneven adoption and interpretation have produced variation in how examiners apply the act, which is why it runs a guidance process and has published implementation guidance on tangible net worth and virtual currency, right-of-use leases, and stablecoin tangibility (updated April 2, 2026). States that have not adopted the act keep their own definitions, which can differ in both the categories and the ratio. Adopting states also amend what they enacted: Minnesota amended both subdivisions of 53B.62 in its 2026 session. Treat the model text as the shape of the rule and the current text of each state's statute as the rule itself.
What to do now
- 1
Find the governing statute in each licensed state
Confirm whether the state has enacted the MTMA, in full or in part, and pull the current text of its permissible investments sections. Do not assume last year's version is still accurate.
- 2
Compute outstanding money transmission obligations
Establish the number the test measures against: what you owe customers on outstanding transmission obligations, at the frequency your states expect it to be demonstrated.
- 3
Sort the balance sheet into statutory categories
Map each asset you intend to count against the statute's list rather than against an internal liquidity definition. Assets that do not fall in a listed category do not count, however liquid they are.
- 4
Close any gap with an instrument the statute names
Where the coverage falls short, the usual fixes are moving funds into a listed cash or deposit category or putting a conforming standby letter of credit in place, not reclassifying an asset that the statute does not list.
- 5
Monitor continuously, not at the reporting date
Because the obligation runs at all times, build the check into your regular close rather than into report preparation, and keep documentation showing coverage through the period.
Frequently asked questions
How much must a money transmitter hold in permissible investments?
Under the model language, an amount whose market value, computed under US GAAP, is not less than the aggregate amount of all outstanding money transmission obligations, maintained at all times (Minn. Stat. 53B.61, paragraph (a)). States that have not enacted the model law set their own standard.
Does the surety bond count toward permissible investments?
In the model language, one hundred percent of the surety bond or deposit that exceeds the licensee's average daily money transmission liability in that state counts (Minn. Stat. 53B.62, subdivision 1, clause (5)). The portion of the bond covering that liability is not counted again.
Do customer funds sitting in a bank account count?
Cash, including demand deposits, savings deposits, and funds in accounts held for the benefit of customers at a federally insured depository institution, is the first listed category. Commingling with the licensee's own assets does not remove the statutory trust that attaches to permissible investments.
Is the permissible investments list the same in every state?
No. CSBS reports thirty-one states have enacted the MTMA in full or in part, and notes uneven adoption and interpretation among them. States outside that group apply their own definitions, and adopting states amend their versions over time, so the list has to be checked state by state against current text.
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