Money Services Businesses (MSBs) have been a critical part of the U.S. financial system for more than a century. Although the term MSB may sound modern, the concept dates back to the early 20th century, when companies first began offering financial services outside of traditional banks. Over time, MSBs evolved from simple money transmitters and check cashers into complex, highly regulated institutions powering global payments, remittances, and digital finance.
Early Origins of MSBs
The roots of MSBs in the United States can be traced to the rise of check cashers and money transmitters in the early 1900s. At the time, many workers were unbanked, especially immigrants and low-income laborers who relied on cash-based systems. Check cashing outlets emerged to provide basic financial access, while early money transmitters allowed immigrants to send wages back home.
These services filled an important gap in the financial system, offering practical solutions for millions of Americans excluded from traditional banking. However, the lack of oversight also created opportunities for fraud, insolvency, and illicit activity.
Regulation Takes Shape
By the mid-20th century, regulators recognized the need to bring oversight to non-bank financial intermediaries. States began introducing licensing laws for money transmitters and currency exchangers, requiring them to maintain reserves, post surety bonds, and undergo supervision. These rules were designed to protect consumers and ensure that funds entrusted to MSBs would be secure.
The 1970s marked a turning point with the passage of the Bank Secrecy Act (BSA). The BSA required MSBs, like banks, to comply with anti-money laundering (AML) obligations, including:
• Filing Currency Transaction Reports (CTRs) for transactions over $10,000.
• Maintaining detailed records of transfers.
• Reporting suspicious activity through Suspicious Activity Reports (SARs).
FinCEN and Federal Oversight
In 1990, the Financial Crimes Enforcement Network (FinCEN) was established as the lead federal agency overseeing MSBs under the U.S. Treasury Department. FinCEN expanded reporting and compliance obligations, requiring MSBs to formally register with the federal government beginning in 2001 under the USA PATRIOT Act.
This registration created the first nationwide database of MSBs, improving transparency and enforcement. At the same time, the Patriot Act strengthened AML requirements, reflecting growing concerns about terrorism financing and the use of informal money transfer networks.
State-by-State Regulation
Despite federal oversight, the licensing and day-to-day regulation of MSBs remained largely state-based. Each state developed its own rules for net worth, bonding, and compliance, creating a patchwork of regulatory frameworks. For decades, this fragmentation was a significant burden for businesses that wanted to expand nationally, as they had to apply for, maintain, and undergo examinations in multiple states independently.
The Digital Age and Virtual Currencies
In the 2000s and 2010s, the financial landscape transformed with the rise of fintech platforms, prepaid cards, mobile wallets, and cryptocurrencies. FinCEN confirmed in 2013 that administrators and exchangers of virtual currencies (such as Bitcoin) were considered MSBs under federal law. This landmark decision brought crypto firms under the same AML and BSA obligations as traditional money transmitters, dramatically expanding the scope of MSB regulation.
Modern Reform: The Money Transmission Modernization Act (MTMA)
To address the inefficiency of fragmented state licensing, regulators introduced the Money Transmission Modernization Act (MTMA) in the late 2010s. By 2025, 31 states had adopted or partially adopted the MTMA, creating uniform standards for licensing, capital, and compliance across major jurisdictions like California, New York, Texas, and Florida.
The MTMA ushered in a new era for MSBs by:
• Standardizing net worth and surety bond requirements.
• Allowing shared examinations across states.
• Clarifying the treatment of digital assets under existing rules.
For the first time, MSBs could pursue a true multistate strategy without being held back by regulatory duplication and inefficiency.
Conclusion
The history of MSBs in the United States reflects a broader story: the balance between financial innovation and consumer protection. From early check cashers serving unbanked workers to modern digital platforms powering global payments and crypto custody, MSBs have continuously adapted to meet evolving needs.
Today, with federal oversight from FinCEN, state harmonization through the MTMA, and integration of virtual currencies into the regulatory framework, MSBs are positioned not just as alternatives to banks, but as essential pillars of the U.S. financial ecosystem.