Recently, the Governor of South Dakota, Kristi Noem, signed into law SB 58, which amended and repealed many parts of the state’s money transmission law enacted in 2023 to bring the law more into alignment with a model Money Transmitter Model Law. South Dakota was one of several states that have enacted the model law since 2022 (covered by InfoBytes here, here, here, and here), to harmonize the licensing and regulation of money transmitters between states.
Among many other new provisions, the Act defined “money” to mean a “medium of exchange that is authorized or adopted by the United States or a foreign government” but excluded any central bank digital currency. Additionally, the Act provided for several exemptions, such as the “agent of a payee” exemption, which exempted an agent who collects and processes payment from a payor to a payee for goods and services other than money transmission itself from the Act’s coverage, under certain specified circumstances.
The Act also imposed a licensing regime on persons engaged in the business of money transmission and authorizes and encourages the South Dakota Director of the Division of Banking (Director) to coordinate the licensing provisions with other states and utilize the Nationwide Multistate Licensing System for the license applications, maintenance, and renewals. SB 58 amended the required surety bond amount from $100,000 to $500,000, to the greater of $100,000 or an amount equal to the licensee’s average daily money transmission liability in South Dakota for the most recent three-month period, up to a maximum of $500,000, or if the licensee’s tangible net worth exceeds 10% of total assets, $100,000.
Once a license application is completed, the Director will have 120 days to approve or deny the application. In addition to the license application process, the Act also outlined the criteria for renewing, maintaining, and changing control of the license, as well as the licensee’s responsibility to keep records and maintain permissible investments. Notably, if a licensee is transmitting virtual currencies, then the licensee must “hold like-kind virtual currencies of the same volume as that held by the licensee but that is obligated to consumers” instead of the permissible investments otherwise listed under the Act. The Act will go into effect on July 1.
