Does your LatAm based business offer currency conversion, transfers of funds to the US or loan programs, in fiat or crypto?

Business models involving the deposit or transfer of funds into the US or lending to a US individual or business, whether involving fiat or crypto, can implicate a variety of US federal and state laws and regulations governing, among others, banking, lending and money transfers. 

In the US, an institution which accepts deposits and makes loans generally must qualify as a bank. This would include an entity whose business is to take local currency, convert it into crypto and then exchange it for US dollars which are maintained in an account in the US. An entity that makes loans but does not accept deposits does not always have to qualify as a bank. However, it still could be subject to a different set of regulations and licensing requirements imposed on lenders by certain states.  In addition, certain states require businesses engaged in virtual currency to obtain a license, and those involved in the transfer of funds to obtain a money transmitter license.  As these laws and regulatory requirements differ from state to state, a careful examination would have to be made of those applicable to the specific states in which you intend to operate.

Any bank or entity engaging in banking activities must obtain a bank charter before conducting business in the US. Banking regulation in the US follows a dual system, and as a result banking organizations can be chartered at either the federal or state level.  Under either regulatory regime, statutes and regulations define the scope of the banking institution’s permitted powers and activities and impose limitations and responsibilities upon it. There are different forms of banking institutions including national banks (organized pursuant to Federal law) and state-chartered banks (organized pursuant to the laws of a specific state). Within those broad categories, there are different types of institutions such as thrifts or savings and loans, credit unions, trust companies and limited purpose institutions which are subject to different regulations and limitations on their activities.

The type of charter, organization structure, nature and specific states where the activities are being conducted will dictate which set of laws and regulations apply. Every bank will typically be subject to the direct supervision of one or more bank regulatory agencies, each of which is responsible for supervising its internal operations and enforcing compliance with all applicable state and federal laws. 

The primary bank regulators in the US at the federal level are the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board (FRB), and the Office of the Comptroller of the Currency (OCC). In addition, each state has its own banking commission or other supervisory authority which is the primary regulator of banks chartered under the laws of that state. Because the FDIC insures their deposits, a state-chartered bank is usually also subject to the regulatory authority of that agency or the FRB. The FDIC insures deposits up to $250,000 for an individual person or entity, although it has the authority to cover deposits higher than that if it determines that an institution’s failure carries “systematic risk”.  When a bank fails, the FDIC steps in as receiver to liquidate or sell the institution’s assets and to assume its liabilities for deposits.

National banks are federally chartered under the National Bank Act or similar legislation. They must be members of the Federal Reserve System and have their deposits insured by the FDIC. National banks are excluded from regulation by state banking agencies because they are federally chartered, and are regulated by the FDIC, FRB and/or the OCC.

Even if a financial business’s activities do not technically constitute banking, such business may be subject to other regulations or licensing requirements.  Depending on where it does business, an entity involved in lending money could be required to obtain a lending license from one or more states and would be subject to a variety of state and federal laws and regulations, particularly if consumers are involved.  Similarly, in certain states, a business engaged in fund transfers (in fiat or crypto) might be required to obtain a money transmitter license and possibly a virtual currency license.  In addition, there are other state and federal consumer credit and similar regulations with which its operations may have to comply.

If you need help navigating the US financial regulatory landscape, we can assist you in evaluating what regulations your existing or proposed business might be subject to and explore compliance solutions!