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Financial Services Law Insights and Observations

Maryland says crypto enforcement could affect money transmitter licensure

Licensing State Issues Enforcement State Attorney General Maryland Money Service / Money Transmitters

On June 22, the Maryland Commissioner of Financial Regulation issued an advisory on recent enforcement actions by Maryland and federal securities enforcement agencies against cryptocurrency-related businesses that could potentially impact businesses pursuing money transmitter licensure. The actions allege certain businesses offered products constituting securities while they were only licensed as money transmitters by the Commissioner of Financial Regulation. The state takes “character and fitness” into consideration for licensure and although the Commissioner does not enforce securities laws, he or she must consider violations of law, including violations of Maryland securities law, when determining whether to grant licenses. The advisory reads, “compliance with law, particularly Maryland law, regardless of whether or not the law falls within the Commissioner’s purview, must be considered when determining whether a licensee warrants the belief that business will be conducted lawfully, and thus whether the licensee is, or remains, qualified for licensure.” Moreover, violations of securities laws could form the grounds for action by the Commissioner against a licensee, “including but not limited to, an action seeking to revoke a license.”