Money Transmitter Bond

Money Transmitter Bond


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A money transmitter has a lot of responsibility and as a result consumers and businesses take on some risk when dealing with them. To help mitigate the risk that comes with money transmitters, money transmitter bonds exist to protect both the consumers and the state.

What exactly is a money transmitter bond and how does it work? If you’re a money transmitter, keep reading to find out!

What is a money transmitter bond?

A money transmitter bond is a unique type of surety bond that money transmitters are often required to have. This specific surety bond type is designed to guarantee that a money transmitter is in compliance with state regulations and renders their professional services honestly. Of course, a surety bond can’t guarantee that a money transmitter won’t do something dishonest or harmful (such as misusing, stealing, or withholding funds), but it does provide financial protections for consumers as well as the state the money transmitter bond is issued in. If the money transmitter does make a transgression that harms the consumer or state, action can be taken thanks to the money transmitter bond.

 Most states require that money transmitters take out some kind of money transmitter bond for them to be allowed to work in that role. If you’re not sure if your state requires a money transmitter bond, you can double check with your state’s Business Licensing Bureau or Department of Finance.

 Some states will refer to this bond type by a different name and in certain states any business that deals with virtual currencies will need a money transmitter bond to do business (such as in Connecticut, North Carolina, and New York).

How does a money transmitter bond work?

So, how exactly does a money transmitter bond protect consumers and the state? A money transmitter bond provides protection for when a money transmitter misuses, steals, or withholds funds they gain access to through their customers.

 If someone files a claim against a money transmitter bond and that claim is approved, the party that filed the claim receives financial compensation (up to the bonding capacity).

 There are typically three parties involved in a money transmitter bond:


Principal- The principal is the party that must take out the money transmitter bond.

Obligee- The obligee requires the money transmitter bond, usually this is the state government.

Surety- The company that issues the bond and ensures that the principal fulfills the contract is known as the surety. They will pay out any approved claims initially, but the principal will need to pay the claim amount back to the surety.


The surety will pay out approved claims to the victim, but the principal isn’t in the free and clear here. The principal will instead owe that claim money to the surety. The surety protects the consumer by making sure they compensate them in a timely manner.


The following terms can be helpful to know when it comes to understanding how money transmitter bonds work.

 Bonding capacity- This is the maximum amount a consumer can claim against the money transmitter bond. Let’s say the maximum bonding capacity is $50,000 then the obligee can’t claim more than $50,000.

Bond premium- Usually the cost of a money transmitter bond is a set percentage of the bonding capacity. So if the bond capacity is $50,000 and the bond premium is 10%, you would pay $5,000 for the bond.

Bond term- The bond term represents how long the surety bond is active and they are usually renewable.

Who needs a money transmitter bond?

Again, most states require that money transmitters hold a money transmitter bond in order to offer their professionals services surrounding transferring money or payments from one person or business to another. These services can include wire transfers and money service businesses. Your state’s Business Licensing Bureau or Department of Finance will know if you legally need a money transmitter bond to become properly licensed.

The cost of money transmitter bonds

So, how much do money transmitter bonds cost exactly? Well that depends on a few different factors. Usually, the cost of buying a money transmitter bond is a small percentage of the overall bonding capacity (which ranges from $10,000 to $5,000,000 depending on what state you work in). Your personal credit score, business financial statements, your industry expertise, and your asset profile will also be taken into account when determining a price.


The amount of transmissions you perform in a year are also a factor that the surety will consider when determining pricing. The more transmissions you do, the higher the bonding capacity will usually be. Overall, money transmitter bonds are considered fairly risky, so the surety will be very careful when determining pricing and underwriting the bond.


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