On-shore VASP in United States
Locally-incorporated VASP that operates under full local jurisdiction, holding all required licenses and registrations.
On-shore VASP is conditionally permitted in United States with a local entity, subject to AML obligations and high licensing burden.
Verdict Details
- Permitted
- conditional
- Local entity required
- Yes
- Licensing burden
- High
- Last updated
- 2026-07-13
AML Obligations
- FinCEN MSB registration (Form 107, immediate) with ongoing AML/BSA program obligations under the Bank Secrecy Act
- State Money Transmitter Licenses in 49 states + DC (18–36 months for full coverage, $2M–$10M+ in bonds/fees)
- Travel Rule compliance for all CVC transactions ≥ $3,000 (domestic); must collect and transmit originator/beneficiary info (name, address, wallet address/transaction ID)
- Currency Transaction Reports (CTR) for transactions ≥ $10,000
- Suspicious Activity Report (SAR) filing obligations
- OFAC sanctions screening obligations for all transactions
- If trading securities tokens: SEC broker-dealer registration and custody rules
- If offering derivatives: CFTC registration as Futures Commission Merchant (FCM) or Swap Dealer (SD)
- NY BitLicense required for serving New York customers (12–24+ months application, $2M+ capital)
- California DFAL license required by July 1, 2026 (DFPI oversight, $100k/day penalties for non-compliance)
- IRS: mandatory Form 1099-DA reporting (effective 2026); Form 1040 crypto question mandatory
Key Restrictions
- Local incorporation required — entity must be a U.S.-domiciled legal entity
- Multi-state licensing: must hold FinCEN MSB registration + state MTLs in every state where customers reside (49 states + DC; Montana exempt)
- If holding customer crypto assets: must obtain a trust charter (state-level) or OCC national bank charter; SEC custody rules apply if securities are held
- If operating an exchange: MSB + state MTLs + SEC broker-dealer/ATS registration (if securities) + CFTC registration (if derivatives) + NY BitLicense (if New York customers)
- Token classification uncertainty — a token may be a security (Howey Test) under SEC jurisdiction or a commodity under CFTC jurisdiction, with different or overlapping regulatory regimes
- No unified federal licensing framework; patchwork of federal (FinCEN, SEC, CFTC) and state-level (50+ jurisdictions) requirements
- Travel Rule compliance requires technical systems to collect and transmit counterparty data on qualifying transfers
Key Risks
- Dual/multiple regulatory enforcement exposure — SEC, CFTC, FinCEN, DOJ, and 50+ state regulators can all pursue enforcement actions independently
- Token classification risk — SEC's March 2026 interpretation stated most crypto assets are not securities, but uncertainty remains; a wrong classification can trigger retroactive enforcement
- State-level fragmentation — obtaining and maintaining 49+ state MTLs is operationally complex; any lapse in a single state can trigger cease-and-desist orders
- NY BitLicense is among the most onerous state requirements (12–24+ months, $2M+ capital); serving NY customers without it is a high-risk gap
- DOJ criminal enforcement is active — money laundering, fraud, and sanctions evasion prosecutions are a real risk for compliance failures
- IRS scrutiny — automated matching of reported vs. unreported crypto income; mismatches trigger audits/penalties
- Recent enforcement: NY crypto trading firm fined $250k by CFTC for position limit violations and registration failures (May 2024)
- The SAFE Crypto Act (Dec 2025) and Executive Order 14390 (Mar 2026) signal increasing legislative/executive attention on crypto enforcement
- New Jersey lost $435M to crypto scams in 2024, intensifying state-level consumer protection enforcement
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
SEC — Securities, token classification (Howey Test), broker-dealer/ATS registration
CFTC — Commodities (BTC/ETH classified as commodities), derivatives, anti-fraud in spot markets
FinCEN — AML/BSA, MSB registration, Travel Rule enforcement
OFAC — Sanctions compliance for virtual currency transactions
DOJ — Criminal enforcement — money laundering, fraud, sanctions evasion
Bank Secrecy Act (1970) — AML/CFT, MSB registration and reporting obligations
Securities Act of 1933 / Securities Exchange Act of 1934 (1933) — Securities registration, broker-dealer/exchange/ATS requirements
New York BitLicense (23 NYCRR Part 200) (2015) — NY-specific virtual currency business licensing
California DFAL (2025) — Digital Financial Assets Law — state crypto licensing
VASP: FinCEN MSB registration (immediate, Form 107) + state Money Transmitter Licenses in 49 states + DC (18-36 months for full coverage, $2M-$10M+ in bonds/fees). Montana is sole exemption.
CUSTODY: Trust charter (state-level) or OCC national bank charter; SEC custody rules apply if holding securities. OCC interpretive letters permit national banks to provide crypto custody.
EXCHANGE: MSB (FinCEN) + state MTLs + SEC broker-dealer/ATS registration if trading securities + CFTC registration (FCM/SD) if offering derivatives. NY BitLicense required for NY customers (12-24+ months, $2M+ capital).
Securities and Exchange Commission (SEC): Oversees digital assets deemed securities, including issuance and resale; issued a March 17, 2026, interpretation clarifying federal securities laws' application to crypto assets and transactions, stating most crypto assets are not securities.
Commodity Futures Trading Commission (CFTC): Regulates commodities and derivatives; joined the SEC's 2026 interpretation and signed a March 11, 2026, Memorandum of Understanding (MOU) with SEC for coordinated oversight, including "innovation exemptions" for DeFi and spot trading.
Financial Crimes Enforcement Network (FinCEN): Enforces AML/CFT under the Bank Secrecy Act (BSA), treating crypto firms as money services businesses since 2013 guidance.
State regulators: Examples include California's DFPI (Digital Financial Assets Law effective July 1, 2026, requiring licenses with $100k/day penalties); New Jersey Department of Banking and Insurance; New York's NYDFS (BitLicense regime); Connecticut (money transmitter laws).
Travel Rule adopted — threshold: $3,000 (domestic); $10,000 for CTR filing
Threshold Amounts: $3,000 for CVC transfers; information on originator and beneficiary must be collected and shared above this amount.
Covered VASPs: All VASPs and MSBs acting on behalf of clients, including crypto exchanges, custodial wallets/wallet providers, crypto ATMs, trading platforms, and any U.S.-based money transmitters handling CVC under BSA.
Technical Implementation Requirements: VASPs/MSBs must collect and transmit details of the originator (sender) and beneficiary (recipient), such as names, addresses, and wallet addresses or transaction IDs. This mirrors wire transfer standards, with requirements to verify transactions do not involve sanctioned entities. Firms must update AML/CFT programs, enhance KYC/CDD, and integrate Travel Rule processes; FinCEN aligns with evolving FATF guidance (e.g., 2025 revisions on beneficiary info and payment chain responsibilities).
Evidence fact us.tax not found (may have been renamed).
On December 15, 2025, U.S. Senators Elissa Slotkin and Jerry Moran introduced the Strengthening Agency Frameworks for Enforcement of Cryptocurrency (SAFE Crypto) Act to establish an inter-governmental task force to combat digital fraud
On March 6, 2026, White House officials issued Executive Order 14390 targeting foreign scam centers and protecting local retail investors
CFTC fined a New York-based crypto trading firm $250,000 for violating speculative position limits on Bitcoin futures contracts. The CFTC order, entered on May 29, 2024, alleged that BlockTrade Capital LLC failed to register as a commodity pool operator (CPO) and exceeded position limits on CME Bitcoin futures between January and March 2024. The firm agreed to pay the fine and cease violations. CFTC Press Release 8731-24
CFTC issued a cease and desist order against CryptoPulse Advisors, a decentralized finance (DeFi) platform, for offering leveraged retail commodity transactions in digital assets without registration. The order, published May 28, 2024, required immediate cessation of unregistered trading services and payment of a $75,000 civil monetary penalty. CFTC Press Release 8730-24
The 24-hour window shows a mixed enforcement landscape: while major U.S. securities and commodities regulators (SEC, CFTC) issued modest fines and cease-and-desist orders (totaling $325,000 combined), the DOJ’s indictment of a crypto mixer operator signals a continued focus on cryptocurrency-specific money laundering (privacy coins, chain-hopping) as distinct from generic cybercrime. This aligns with the broader 2024 trend where regulators increasingly target financial infrastructure rather than individual token issuers. CoinDesk Analysis, May 29, 2024
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- high
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Conditional — a locally-incorporated on-shore VASP is permitted in the US, but must navigate a high-burden multi-layered licensing regime: FinCEN MSB registration (immediate), state Money Transmitter Licenses in 49 states + DC (18–36 months), SEC/CFTC registrations if dealing in securities or derivatives, and state-specific licenses like NY BitLicense or CA DFAL, plus comprehensive AML/BSA/Travel Rule obligations and IRS tax reporting.
Questions this verdict aims to answer
- What license(s) are required to operate locally?
- What capital, governance, and reporting obligations apply?
- What is the application process and timeline?