Do Trust Companies provide money transmitter license coverage?
This is widely debated. The short answer is that they can provide limited money transmitter license coverage, for their own products/services and that too in a limited number of US states that recognize the charter of the Trust company in question.
For example if you want to start an over the counter bitcoin trading services, OTC services very much require a license if the “intent” is to buy from others and sell on to others, where your eventual role would be that of an intermediary.
Also, you need to understand that Trust Companies are recognized in certain states and are not recognized by others.
This depends on where the original charter of the trust company is and you can ask (legally) if a reciprocity agreement between the trust company’s original state (from where the charter was issued) and the state in which it is doing business, as valid reciprocity and is recognized.
You are well within your rights to ask them for a legal opinion showing such reciprocity.
In our opinion (and remember we are not lawyers), we do not believe a Trust Company’s charter only can be used to cover other businesses for MTL coverage, i.e. business that would be classified as an MSB and would require a money transmitter license, cannot rely on a Trust Company’s charter and then assume they can be covered for it.
States like Texas, California, and New York do not recognize such arrangements. In our research (in 2021) we feel today a Trust Company can provide semi-coverage anywhere for 12 to 14 small US states.
If any Trust Company provides you with the explicit understanding of your business being covered under their Trust Charter, please do ask them to provide this in writing explicitly for your flow of funds. It would also be very helpful to get a legal opinion on this as well.