Crypto devs rethink custody under FinCEN MSB guidance

If no custody/control, money transmitter licensing is less likely

A tools-only product model that never accepts, holds, or controls user funds is less likely to trigger money transmitter licensing. The stated plan, building financial data tools and connections without brokering or handling transactions, fits that lower-risk profile.

according to FinCEN guidance, the threshold question is whether a party accepts or transmits value on behalf of others and therefore exerts custody or control. When a provider confines itself to analytics, data connectivity, and read-only integrations, the risk of being treated as a Money Services Business generally falls, though outcomes remain fact-specific.

Non-custodial software still faces operational and regulatory expectations outside of licensing. Data privacy, cybersecurity controls, and transparent disclosures remain central where customer financial information or connection credentials are processed.

Editorial analysis of legal commentary indicates that the core risk hinge is effective control over transaction initiation or settlement. Said De Silva Law Offices, in commentary on U.S. transmission laws: “One expert view is that liability under U.S. money transmission laws requires that the entity actually transmit or handle funds, not merely create enabling software/tools.”

In practice, risk concentrates at product edges. One‑click buy flows, custodial wallet features, or programmatic orchestration that can move funds may imply control, increasing regulatory exposure. Keeping key custody, transaction signing, and settlement with the end user or qualified custodians reduces that implication.

Non-custodial tools typically include dashboards, analytics, portfolio tracking, and read-only wallet connections. These functions do not inherently accept or transmit value.

Integration design matters. If a tool routes orders, batches payments, or can initiate transfers without user-controlled keys, regulators may evaluate whether it exercises functional control. Clear boundaries on key management and transaction initiation help maintain the software-versus-service distinction.

Documentation supports the posture. Architecture diagrams, flow-of-funds analyses, and vendor due diligence records demonstrate how the product avoids custody and transmission while still delivering data connectivity.

Regulatory context: DOJ and Lewellen v. Bondi

What Lewellen v. Bondi signals for non-custodial software

Case commentary around Lewellen v. Bondi has centered on whether open-source or tools-only developers who lack fund control should be treated as transmitters. The dispute underscores that custody and functional control remain the decisive considerations.

How DOJ positions differ from tools-only developer claims

According to the U.S. Department of Justice, arguments advanced in the matter reflect a broader view of developer responsibility in certain crypto contexts. By contrast, tools-only positions stress the absence of custody or settlement control as a limiting factor for transmission liability.

FAQ about FinCEN guidance

What activities make a crypto tool a Money Services Business under FinCEN rules?

Accepting or transmitting value, exercising custody or control, initiating or settling transactions, or offering custodial wallets may trigger MSB treatment under federal anti‑money‑laundering regulations.

How can I architect a non-custodial platform to avoid being classified as a broker or money transmitter?

Avoid private key custody, prevent transaction initiation, keep settlement with users or custodians, segregate fee flows, and implement read‑only integrations with audited third‑party connectors.