Without full details about your crypto business, it's impossible to know for sure whether or not it qualifies as an MSB/money transmitter, but this article will explain some key factors, according to the Internal Revenue Service (IRS). Generally speaking, it’s likely that your company is a money services business (MSB) in the eyes of U.S. regulators, as the legal definition seems to broaden by the day. The Bank Secrecy Act (BSA) requires many financial institutions, including money services businesses (MSB), to verify customer identities, maintain records of currency transactions, and report suspicious transactions over $2,000 to FinCEN. To avoid classification as an MSB, your crypto exchange must not handle any money in the form of cash, checks, money orders, credit or debit cards, wire transfers, ACH transfers, PayPal, or other mobile wallets. Your exchange must not allow the exchange of digital currencies, nor issue any form of traveler's checks, money orders, or other forms of stored value like open-loop prepaid cards. Founded in 2014 by Bitcoin veteran Erik Voorhees, ShapeShift is one of the few crypto trading platforms that uses self-custody for their wallets, therefore it does not consider itself an MSB. However, ShapeShift decided to comply with aggressive U.S. regulators by introducing KYC requirements. Voorhees said ShapeShift chose their self-custody, no-KYC model due to data security and in part due to the challenges in applying for a New York License that end up being 100-300 pages. Here at Redeeem, we take the stand that we do not qualify as a money services business (MSB) and we are not legally required to perform KYC ("Know Your Customer") on customers. However, we decided to do it anyway. We created an Anti-Money Laundering (AML) policy, named a Chief Compliance Officer, conduct annual audits by top-tier U.S. legal and compliance firms, retain transaction data for over seven years, and we require all users to verify their identities using Civic App once they reach certain trading limits. Paxful required KYC in March 2020 and LocalBitcoins required KYC a year earlier in June 2019. In conclusion, all crypto exchanges that handle digital or fiat money, or hold custody of funds for customers, will likely become an MSB eventually. For more clarity, read Am I an MSB?.