Self-custodial wallet / non-custodial software in Puerto Rico
Publisher of software where users hold their own private keys. The publisher never holds, controls, or has access to user funds.
Self-custodial wallet is conditionally permitted in Puerto Rico with a local entity, subject to AML obligations and low licensing burden.
Verdict Details
- Permitted
- conditional
- Local entity required
- Yes
- Licensing burden
- Low
- Last updated
- 2026-07-13
AML Obligations
- No AML obligations attach solely for publishing self-custodial wallet software, because the publisher never holds, controls, or has access to user funds or private keys, and thus does not meet the definition of a money transmitter under FinCEN guidance (FIN-2013-G001; FIN-2019-G001)
- If the publisher also provides ancillary services that involve custody, transmission, or exchange of virtual currency (e.g., integrated fiat on-ramp, swap functionality executed by the publisher), it would trigger MSB classification and the full suite of BSA/AML obligations: designate an AML compliance officer, implement CIP procedures, conduct ongoing monitoring, file SARs (threshold $5,000), and register with FinCEN as an MSB
- Under PR Money Services Business Act (Act 17-2016), a licensed money transmitter must also comply with Puerto Rico-specific AML program requirements including independent audits, transaction monitoring, and OFAC sanctions screening
Key Restrictions
- The software publisher must not hold, control, or have access to user private keys or funds — doing so would convert the model to a custodial VASP triggering full MTL licensing
- If the wallet software integrates features where the publisher facilitates exchange or transmission of virtual currency (e.g., built-in token swaps routed through the publisher's infrastructure), the publisher may be deemed a money transmitter under FinCEN guidance and PR Act 17-2016
- Tokens classified as securities under the Puerto Rico Uniform Securities Act (Law 60-2020) that are integrated into or promoted through the wallet software could trigger securities registration requirements for the publisher
Key Risks
- Regulatory boundary risk: FinCEN and OCIF may take a broader view of what constitutes 'money transmission' in wallet software (e.g., hosted swap APIs, transaction routing middleware), potentially reclassifying non-custodial publishers as MSBs
- Securities law exposure if the wallet promotes, features, or facilitates transactions in tokens that meet the Howey Test criteria under PR securities law (Law 60-2020)
- Lack of clear Puerto Rico-specific guidance on non-custodial software publishers means regulatory interpretation could shift
- Enforcement precedent risk: U.S. federal actions (e.g., against Tornado Cash, Consensys/SEC) signal increasing scrutiny of wallet software that exercises any control over user transactions
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
Guidance on Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies (FIN-2013-G001, March 18, 2013): This initial guidance clarified that exchangers and administrators of virtual currency are "money transmitters" under the BSA.
Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (FIN-2019-G001, May 9, 2019): This updated guidance broadened the scope, clarifying that various VASP models (e.g., peer-to-peer exchangers, DApps, anonymity-enhanced coin providers) may also be MSBs.
Required License: Money Transmitter License (MTL) from the OCFI.
Reasoning: When an exchange facilitates the exchange of fiat currency for virtual assets, or vice-versa, it is performing a money transmission service by accepting funds (fiat or virtual assets) from one party and making them available to another, or transmitting funds on behalf of consumers.
Puerto Rico Money Services Business Act (Act No. 17-2016): This act regulates money services businesses in Puerto Rico, including licensing, examination, and enforcement. VASPs operating as money transmitters in Puerto Rico are typically required to obtain a license under this Act and comply with its provisions, which include AML program requirements.
Comprehensive AML Program: Licensed entities must establish and maintain a robust Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) program. This includes:
FinCEN Regulations (31 CFR Chapter X): FinCEN, a bureau of the U.S. Department of the Treasury, issues regulations implementing the BSA.
Bank Secrecy Act (BSA) (31 U.S.C. § 5311 et seq.): This is the foundational AML legislation in the U.S. It requires financial institutions (including MSBs/VASPs) to keep records and file reports on certain financial transactions.
FinCEN: Also requires MSB registration (as a money transmitter) with FinCEN.
Puerto Rico Uniform Securities Act (Law No. 60-2020), Article 1.102(28): Defines "security" to include, among other things, "investment contract." This broad definition allows OCIF to apply the Howey Test framework to novel instruments like cryptocurrency tokens.
Puerto Rico Department of the Treasury (PRDT): Involved in tax compliance and IRS guideline implementation
Office of the Commissioner of Financial Institutions (OCIF): Responsible for licensing and regulating money services businesses (MSBs) and digital asset custody services
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- medium
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Conditional — a publisher of pure self-custodial (non-custodial) wallet software in Puerto Rico is not itself a VASP/MSB and faces no licensing or AML obligations, provided it never holds, controls, or has access to user private keys or funds; however, any features that involve transmitting or exchanging virtual currency on behalf of users (e.g., integrated swap services, fiat on-ramps) would trigger MTL licensing, full BSA/AML compliance, and OCIF supervision.
Questions this verdict aims to answer
- Does software publishing trigger VASP / MSB classification?
- Do AML obligations attach when no custody exists?
- What disclosure or consumer-protection rules apply?