Key takeaways
- Several US states require money transmitters that hold virtual currency for customers to hold the same type and amount of virtual currency, known as like-kind holding.
- The MTMA includes optional virtual currency provisions that states may adopt; some states left them out.
- Like-kind holding means a transmitter owing customers 100 bitcoin must hold 100 bitcoin, not the dollar equivalent in other assets.
- Daily reconciliation of customer balances against wallet holdings, per asset, is the core control.
The like-kind rule
When a licensed money transmitter holds virtual currency, such as bitcoin or a stablecoin, on behalf of customers, it owes those customers that virtual currency. Covering the obligation with dollars or Treasury bills would expose customers to price movements: if the price rose, the dollar assets would no longer be enough. Like-kind holding avoids that by requiring the transmitter to hold the same type and amount of virtual currency that it owes.
The same logic applies to stablecoins. A transmitter owing customers a dollar stablecoin should hold that stablecoin, not a different stablecoin or dollars, because the instruments can trade at different values in stress and carry different issuer risk.
The Money Transmission Modernization Act includes optional virtual currency provisions built on this principle, and states that adopted them apply like-kind treatment to virtual currency obligations. Other states address virtual currency through their own laws or guidance, and some, such as Wisconsin, adopted the MTMA without its virtual currency component. Firms must check each state's version.
How it is reported
The NMLS MSB Call Report includes an additional section for licensees that hold virtual currency, covering virtual currency obligations and holdings. The figures must be reported per asset, because like-kind coverage is tested asset by asset, not in total dollar value. Our guide to the MSB call report covers the main permissible investments section.
Worked example
A licensed crypto platform owes customers the balances below at the end of a day. Its wallets and custodians hold the amounts shown. In dollar terms the platform holds more than it owes, but like-kind coverage is tested per asset. It is short 2.4 ether, even though it has surplus bitcoin.
The platform must acquire or move 2.4 ether into customer holdings, and investigate why the shortfall arose. The usual causes are network fees paid from customer wallets, withdrawals processed on-chain before being posted to the ledger, or deposits credited to customers before they were confirmed.
| Asset | Owed to customers | Held in wallets and custody | Difference |
|---|---|---|---|
| Bitcoin (BTC) | 412.80 | 413.05 | 0.25 surplus |
| Ether (ETH) | 5,210.00 | 5,207.60 | 2.40 shortfall |
| USD stablecoin | 18,450,000.00 | 18,450,000.00 | 0.00 |
Controls
Reconcile customer balances against on-chain wallet balances and custodian statements every day, per asset and per wallet. Record network fees as the platform's own cost, not as a reduction of customer holdings. Credit deposits only after the required confirmations. Keep the platform's own assets in wallets separate from customer wallets. New York's Department of Financial Services updated its guidance on custodial structures in September 2025, replacing its January 2023 guidance; it expects customer virtual currency to be segregated and separately accounted for, both on-chain and in internal ledgers, and never used for the custodian's own purposes.
Safeheld reconciles ledgers, wallets and custodians per asset each day and flags like-kind shortfalls. See crypto custody under MiCA and Safeheld reconciliation.
Frequently asked questions
What is the like-kind requirement for virtual currency?
A requirement to hold the same type and amount of virtual currency that a money transmitter owes its customers.
Does every state apply like-kind holding?
No. The MTMA's virtual currency provisions are optional, and states treat virtual currency differently.
Is like-kind coverage tested in total or per asset?
Per asset. A surplus in one asset does not cover a shortfall in another.
What causes like-kind shortfalls?
Network fees paid from customer wallets, unposted withdrawals and deposits credited before confirmation are common causes.
References
- Massachusetts General Laws c.169B §9: net worth, security and permissible investments
- Iowa Code §533C.804: types of permissible investments (Uniform Money Transmission Modernization Act)
- Wisconsin Department of Financial Institutions, Money Transmission Modernization Act
- NMLS, MSB Call Report Section III: Permissible Investments Report
- NYDFS, Updated guidance on custodial structures for customer protection in the event of insolvency (September 2025)
About Safeheld
Safeheld reconciles client money every day, resolves every difference and prepares every regulatory return for sign-off, for regulated firms in the United States, the United Kingdom, the European Union, Canada, Australia, Singapore and Hong Kong. To discuss your operations, contact us at safeheld.com/contact.
This article is for general information and does not constitute legal or regulatory advice.