Any company running a payments business has come across one major hurdle in the US: state money transmitter law. Over 45 jurisdictions within the US regulate money transmission, broadly defined as engaging as a business in the acceptance and transmission of funds. Naturally, enterprising lawyers have discovered ways to avoid money transmission law, such as partnering with banks or already-licensed money transmitters. Arkansas passed a law on March 24 that signals its support for the approach of passporting.
Passporting would work by allowing states with a license in one state to “passport” their license to other states that have similar licensing requirements. Thus, theoretically, a company licensed in New York could “passport” its license to California and operate its money transmitter business there without undertaking the long and arduous licensing process in California.
The state of Arkansas has taken the first step towards passporting by passing a law that gives the state authority to engage in a multistate licensing regime, either with the Conference of State Bank Supervisors or another automated licensing system. For more information on this law, take a look at the recently passed bill text. The resulting regime would aim to reduce filing fees, wait times for licensing, and administrative costs for payments businesses operating in the US. In order for a multistate licensing system to become a reality, other states will have to join in. We will keep you posted if others follow the lead of Arkansas.