Model Money Transmission Modernization Act – The Harmonization of US Money Transmission Regulation

December 11, 2023
The Model Money Transmission Modernization Act is a model act introducing a multistate supervisory system and harmonizes money transmitter licensing requirements and prudential standards across the United States. This model has made significant strides through state legislatures during the 2023 legislative sessions, and is expected to gain even more traction in 2024. This analysis will look at what the model law is, five of its key provisions, and the current status of its state-level adoption.


What is the Model Money Transmission Modernization Act?

The Model Money Transmission Modernization Act (MTMA) is a model law drafted by the Conference of State Bank Supervisors (CSBS) in 2021. This legislative model was drafted with the intention of creating uniformity within the payments and money transmission industry throughout the United States through decreased regulatory burden and interstate licensing. 

Over the last few years, the MTMA has received increasing attention within state-level legislatures. As of November 22, 2023, nearly half of all state legislatures have at least introduced formalized legislation or rulemaking pertaining to the MTMA. This legislative model is one of the most important pieces of state-level payments-related legislation since the Uniform Money Services Model Act (UMSA) that was created in 2000 by the Uniform Law Commission (ULC). Its importance stems from what will be created once there is widespread adoption of the act. Once fully enacted, the MTMA will create a full 50-state integrated licensing and supervisory system that will affect the entire money transmission industry, with benefits throughout the reporting, examinations, and multistate licensing processes that currently suffer as a result of regulatory fragmentation within state-level legislation.

The MTMA and the UMSA are slightly different in scope. Whereas the MTMA exclusively targets money transmission, the UMSA targets the wider money services industry, which includes additional activities unrelated to payments. Articles 2-4 within the UMSA create licensing requirements for money transmission, check cashing, and currency exchanges, respectively. The scope of the MTMA only includes money transmitters, with licensing requirements provided in Section 5.01. Despite the differences, both pieces of legislation address the fragmentation and regulatory burden of many state-level regulations. 

Conference of State Bank Supervisors

The CSBS is an independent body that was created to support state regulators. The overall aim of the body is to advance state-level financial supervision through uniform laws and regulations, such as the MTMA. The CSBS was created in 1902 as the National Association of Supervisors of State Banks before changing its name to the Conference of State Bank Supervisors in 1971. It is the only organization in the United States that is dedicated towards protecting the US dual-banking system, and has been doing so for more than 110 years. 

Model Law Process

Model laws in the United States are typically created by parties with a vested interest in the industries or jurisdictions they are trying to support. Examples of such parties can be, but are not limited to, companies, unions, lawyers, former and current legislature members, or independent groups with a mix of any of the aforementioned parties, as well as others. These groups draft versions of a law that they believe to be beneficial to the jurisdiction or industry they are aiming to support. These models are then reviewed by that jurisdiction’s legislature, and a decision is made to either adopt, partially adopt, or completely reject the proposed legislation. It is important to note that there is no obligation for a legislature to adopt any form of model law. These are only suggestions for laws, and not federal mandates. 

The model laws within the payments industry that have garnered support, such as the MTMA and the UMSA, have been drafted by independent groups made up of state legislators, lawyers, judges, and people of similar backgrounds. Two notable groups pertaining to the financial services industry are the CSBS and the ULC. Both groups have drafted model laws with the intention of creating more clear and uniform regulation for the payments and money services industries. The ULC was the first to attempt to do so in 2000 with the UMSA, while the CSBS has been the latest to propose model legislation in 2021 with the Model Money Transmission Modernization Act.


Model Money Transmission Modernization Act Breakdown

Key Provisions

The MTMA is aimed at creating uniform regulations for the money transmission industry at the state level. This model act is made up of 13 articles that cover various aspects of state-level legislation. Of the 13, the following five articles cover the main requirements, limitations, and supervision for money transmitters operating throughout the United States:

  1. Article IV – implementation, confidentiality, supervision and relationship to federal law
  2. Article V – money transmission licenses
  3. Article VII – reporting and records
  4. Article X – prudential standards
  5. Article XIII – virtual currency

Article IV, Implementation

Article IV of the MTMA focuses on the supervision, multistate cooperation, and accessibility of licensees’ information. A general overview of the multistate accessibility guidelines can be found in Section 4.01(a) of Article IV. This section allows state and federal regulators to share information, as well as accept licensing, examinations, or investigative reports from other state and federal agencies. This bleeds into other aspects of Article IV, such as supervision, because licensees do not need to produce multiple reports for the different regulators’ examinations. 

Article V, Licensure

Article V provides details on the supervisory aspect of license management, as it deals with license requirements, renewals, and issuance, among other things. This article further develops similar themes from Article IV in terms of interstate accessibility and easing of regulatory burden and implements them into the overall license management. Section 5.02(b) covers states’ use of the Nationwide Multistate Licensing System (NMLS), and explicitly encourages state regulators to engage in multistate licensing and supervision processes. This provides licensees with a single channel to handle their license applications, applications for acquisitions of control, surety bonds, reporting, criminal history background checks, credit checks, fee processing, and their examinations. As of now, the NMLS is used by each state, but this provision further enhances its ability to drive multistate licensing in a strong and cohesive manner.

Article VII, Reporting and Records

Reporting and recordkeeping in the United States varies widely across state lines in terms of the volume of what is required. The MTMA standardizes the reporting and records needed, and calls for the following:

  1. Quarterly report of condition, including the following items:
    1. Financial information at the licensee level.
    2. Money transmission transaction information at both state and nationwide levels.
    3. Permissible investments report.
    4. Transactions destination country reporting for money received for transmission.
    5. Anything else that is reasonably required by the regulatory authority.
  2. Annual audited financial statements.
  3. Quarterly authorized delegate reporting.
  4. Ad-hoc adverse event reporting.
  5. Record retention for three years of the following:
    1. Money transmission obligations sold.
    2. Monthly general ledgers.
    3. Bank statement and reconciliation records.
    4. Outstanding money transmission obligations.
    5. Outstanding money transmission obligations paid within the three-year period.
    6. Names and addresses of all authorized delegates.
    7. Anything else required by the regulatory authority.

Although this article does not not drastically change much within state-level reporting, the importance comes from the parameters for each line item within Sections 7.01-7.05. Article IV eases the communication and examination barriers for regulators, and Article VII standardizes the reports that must be submitted on a quarterly, semi-annually, or annual basis. Even if a state were to only adopt this article, it would result in an immediate decrease in the amount of work going into creating reports that satisfy regulatory requirements. 

Article X, Prudential Standards

The main prudential standards in the United States deal with net worth, surety bonds and similar securities, and permissible investments. The MTMA does not deviate away from these core requirements but standardizes how they are put into practice. In general, the CSBS has included a higher level of detail in these requirements, as outlined in the next sections, resulting in a more robust framework. This section will be broken down into three subsections that cover each of the three categories of prudential standards included within the MTMA. 

Net Worth Requirements

The net worth requirements included in Section 10.01(a)-(c) of Article X are as follows:

  1. A licensee shall always maintain a tangible net worth of $100,000 or:
    1. 3 percent of total assets for the first $100m; plus
    2. 2 percent of total assets between $100m and $1bn; plus
    3. 0.5 percent of total assets above $1bn.

There are two aspects of this section that are worth examining. The first is the use of tangible net worth, as opposed to net worth. This is a significant change because companies only need to use tangible assets in their net worth calculations. The full calculation is the aggregation of a licensee’s assets, less intangible assets, and less liabilities. The second is the required value being based off of total assets as opposed to average business volume, outstanding obligations, or any other business-related metric. The CSBS stated in a webinar attended by Vixio on July 26, 2023 that it based the net worth requirements of the licensees on total assets as it was more indicative of the exposure that each licensee would be experiencing.  

Surety Bond

Surety bonding is a typical prudential standard included for most licensed entities in the United States, and this is no different within the MTMA. Section 10.02 includes the following surety bond requirements for money transmitters:

  1. The amount of the surety bond or equivalent security is as follows:
    1. The greater of $100,000 or an amount equal to the licensee’s average daily money transmission liability for the most recent three-month period. The latter requirement option is capped at $500,000.
    2. If the licensee’s tangible net worth exceeds 10 percent of total assets, the licensee will only be required to maintain a bond of $100,000. 

The major distinction included in this requirement is that the required surety bond amount is not based on the licensee’s number of locations. The idea behind this change is that having prudential standards based on licensed activities is more aligned with the risks that the securities are intending to counteract. Within footnotes 23 and 24 of Section 10.02, the model specifies that some aspects of the securities will be determined by local regulators. This includes all the administrative aspects of the bond such as liability thresholds, beneficiary, cancellations, claims, and more. 

Permissible Investments

Similarly to the other prudential standards mentioned above, the permissible investment requirements found in Sections 10.03 and 10.04 have a targeted and deliberate approach. Although there are certain limitations on using various assets as permissible investments, such as receivables, the largest overall impact is what the overall value requirement is based on. In Section 10.03(a), the MTMA stipulates that permissible investments must be held in an amount greater than or equal to the aggregate amount of all the licensee’s outstanding money transmission obligations according to the investments’ market value. This is standard language in the US, but the key difference is that it is not based on the average value of outstanding obligations. This means that if the level of outstanding money transmission obligations at any point increases past the value of the licensee’s permissible investment portfolio, then the licensee will no longer be in compliance with this provision. Several states use an average as their base; however, the UMSA uses similar wording for its permissible investment requirements in Sections 701-702. Additionally, the CSBS states that the permissible investment requirements should fall in line with transmission volume by the end of the month so that there is no lag time in reporting. 

The CSBS also stated in the previously mentioned July 2023 webinar that its goal with the permissible investments section of this model was to make the requirements less complex and give more flexibility with capital. The best example of this can be found in Section 10.04(a)(5), which allows licensees to use their excess surety bond value as a part of their permissible investment requirements. The CSBS is pushing to have this sort of flexibility included at a widespread level. In addition to capital flexibility, the CSBS is hoping to solve another pain point felt in the industry, investment grading. Within the allowable permissible investment sections, there are certain grade requirements for differing investments. One of the pain points around grading is that different states may grade the same investment in a different manner. This causes unclear and inconsistent allowances for license holders, therefore increasing the regulatory burden felt in the industry. 

Article XIII, Virtual Currency

The CSBS describes Article XIII as “optional” due to it being introduced as a bargaining chip for certain state legislatures requiring virtual currency provisions to be part of their MTMA adoption. So far, only Minnesota and North Dakota have adopted the MTMA with the inclusion of Article XIII, with Alaska having included the article in its proposed bill. When asked by Vixio about why so few states have adopted Article XIII, the CSBS stated that its intention for including the article at this point was to create a more comprehensive virtual currency model law for the future. 

Article XIII covers key aspects of operating as a virtual currency business. The requirements included in this article pertain to licensing for businesses operating within the virtual currency industry, required disclosures to customers of the virtual currency business, recordkeeping, and certain fiscal requirements by which license holders must abide. In general, this can be seen as a step in the right direction for regulation of virtual currency businesses, but it is not expected to have a high level of adoption due to the expected future framework. 

How Does the MTMA Differ from Previous Legislation?

As mentioned in above sections, the most recent attempt to regulate money transmission prior to the MTMA was through the Uniform Money Services Act (UMSA) in 2000. The UMSA was drafted by the ULC and intended to regulate not just money transmission, but the money service business industry as a whole. Despite the UMSA being adopted by 12 states, its language has been inconsistently implemented and interpreted. The USMA was a jumping off point for the MTMA, with language in the licensing and prudential standards sections being nearly identical in both acts, but with an added level of detail in the MTMA. The perceived enhancement of provisions in the MTMA have been well received so far, with some states, such as Texas, replacing the UMSA with the MTMA in its legislation.  

A good example to demonstrate the MTMA’s enhancements is to compare Texas’ Money Services Modernization Act (MSMA) with Colorado’s Money Transmitter Act. For context, Texas’ Money Services Modernization Act is a full adoption of the MTMA, barring Article XIII on virtual currency, while Colorado has not adopted any part of the MTMA. The CSBS stated in the July 2023 webinar it believes most of the pain points for money transmitters are around prudential standards. Because of that focus, this comparison will look at both the prudential standards sections of Texas’ and Colorado’s legislation.

Section MO4(B)(4), Rule 3, 701-7 of the Code of Colorado stipulates that money transmitters operating in the state shall at all times have a net worth of at least $50,000, with an additional $25,000 per location or authorized delegate. This additional value is capped at $100,000. As mentioned above, the MTMA requires net worth to be based on total assets, which Colorado does not reference in its requirement’s language. Colorado also does not specify that licensee’s must calculate tangible net worth as opposed to net worth. Texas, on the other hand, adopted the MTMA’s original wording. This can be found in Section 152.351(a)(1)-(3) of the Texas Money Services Modernization Act, Texas Statutes. It reads that the net worth requirement is based on the licensee’s total assets, and that tangible net worth must be used rather than net worth.

In line with the MTMA’s structure, the next prudential standard is securities and surety bonds. Colorado’s surety bond requirements are tied together with its permissible investment requirements. Section MO1, Rule 3, 701-7 of the Code of Colorado states that licensees must have a combined surety bond and permissible investment portfolio balance of at least $250,000. Additionally, this combined value must be at least equal to the amount of outstanding payment instruments in Colorado. This differs quite a bit from the MTMA’s permissible investment wording in Section 10.02 as Colorado’s required security value does not increase unless the outstanding payment instruments’ total value increases past $250,000, and it uses an aggregated value as opposed to an average. It should also be noted that the MTMA uses hard values throughout this section, which gives local regulators the discretion to set limits in line with their local markets. For instance, Texas has its minimum and maximum values set at $100,000 and $500,000, respectively, whereas Tennessee (another full MTMA adopting state) has its values set at $50,000 and $800,000, respectively. These can be found in Section 152.352 of the Texas Money Services Modernization Act and Tenn. Code Ann., Section 45-7-136(a)-(d) of the Money Transmission Modernization Act.

The last prudential standard included is around permissible investment requirements. As mentioned above, Colorado pools together its permissible investment requirement with its surety bond requirements. Both the wording used by Colorado and the MTMA in terms of the value requirement are fairly similar. The main difference for permissible investments are found in the allowable types of investments. The CSBS specified in the webinar that it wanted to use a similar grading scale across states that have adopted the MTMA, as it believed this to be a pain point for the industry. Section 152.356(a)(1)(J) of the Texas Money Services Modernization Act stipulates that investments with an S&P rating of “AAA” or an equivalent rating are allowed. AAA is the highest rating available on S&P’s scale. Colorado, on the other hand, allows for “One of the three highest grades” in Section 11-110-108(3)(d) of Colorado’s Money Transmitter Act. This highlights the inconsistency in grading that the CSBS is trying to highlight through its amendments to allowable permissible investments. States adopting the MTMA’s wording will have uniformity among their permissible investment requirements, making it easier for license holders to operate in those states.


State-by-State Adoption and Outlook

As of November 22, 2023, the MTMA has been making significant progress through state legislatures. So far, eight states have adopted the model in full, two of which have also adopted Article XIII on virtual currencies. There have also been ten states that have partially adopted the MTMA, and another six states having something related to the MTMA currently being processed. The MTMA was initially drafted in 2021, but most of its traction has come within the 2023 legislative window. The following image covers state-level adoption of the MTMA as of November 22, 2023:

A map of the united states

Description automatically generated

Each state’s individual legislation can be found here:



Level of Adoption


California Money Transmission Act



Assembly Bill 21



Senate Bill 183



Senate Bill 1580


North Dakota

Senate Bill 2119


South Dakota

Senate Bill 43



Money Services Modernization Act



Senate File 2744



Uniform Money Transmission Modernization Act



Uniform Money Services Act



Money Transmission Modernization Act



Money Transmission Modernization Act


West Virginia

House Bill 2627



House Bill 55


New Hampshire

House Bill 522-FN


Rhode Island

House Bill 5533



Senate Bill 268



Senate Bill 1325




The Model Money Transmission Modernization Act is a transformative piece of state-level legislation for money transmitters that will be prevalent for the foreseeable future. Through its alignment of prudential standards and the introduction of a multistate supervisory system, the MTMA will decrease the regulatory burden felt within the industry by providing a uniformity across requirements. It will allow license holders to operate in multiple states with ease, and significantly cut down the fragmentation felt across state lines. 

The drafters of the MTMA, the Conference of State Bank Supervisors (CSBS), put a lot of attention into creating a framework that would align each states’ prudential standards and create an interstate supervisory system. The MTMA changes how the required values of a money transmitter's net worth and surety bonds are determined, as well as how permissible investments are assessed, across state lines. Coupling this with the easing of interstate communication between regulators, this will mean a much more transparent environment for money transmitters within the US.

The CSBS used the ULC’s Uniform Money Services Act, which has been implemented in 12 states, as a jumping off point, to bolster its pursuit of widespread adoption. This also provided the CSBS with clear indications as to where the pain points within the industry have been felt. Going forward into the 2024 legislative session, the CSBS expects 17 more states to pursue full or partial adoption of the MTMA. If this goes to plan, that will result in 35 states having either partially or fully adopting the MTMA, and means widespread adoption is much closer to being realized and the pain points being addressed. 

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