What Qualifies as a Money Transmitter’s Permissible Investments?

Money transmitter permissible investments are the specific categories of safe, liquid assets that a licensed transmitter is allowed to hold against the customer funds it is moving. Under the Model Money Transmission Modernization Act, followed by most states, the market value of these assets must equal or exceed 100% of the transmitter’s outstanding money transmission obligations at all times. The list is short by design: cash and cash equivalents, insured deposits, U.S. government obligations, certain letters of credit, and a limited slice of higher-yield instruments subject to concentration caps.

The 100% Coverage Rule

The core requirement is straightforward. A transmitter’s permissible investment portfolio must have a market value, calculated under U.S. generally accepted accounting principles, that equals or exceeds the aggregate of all outstanding money transmission obligations at all times.¹ Not on reporting day. Not on average. At all times.

Outstanding money transmission obligations include any payment instrument or stored value sold to a person in the United States that has not yet been paid or refunded, plus any money received for transmission that has not yet reached the recipient. Prepaid cards and similar stored-value products count too. Whatever total those figures add up to on a given day is the number the portfolio must match.

Because the standard is market value at all times, the compliance work is continuous. If a transmitter holds Treasury notes and rates spike, the market value of those notes falls. If delegate receivables age past seven days, they stop counting entirely. Systems need to track portfolio value daily, or more often during volatile markets, and alert compliance staff before the portfolio dips below the coverage line. Waiting for the quarterly report to catch a shortfall is how companies lose licenses.

State banking commissioners also retain authority to restrict specific investments within a permissible category if they see a risk to customers that market value does not capture. An asset can fit neatly inside a permissible category and still be disallowed for a particular licensee.

Assets That Qualify Without Limit

The MTMA splits permissible investments into two tiers. The first tier can make up 100% of the portfolio with no concentration restriction. These are the assets most transmitters build their core position around.

Cash and cash equivalents. Demand deposits, savings deposits, and customer-benefit accounts at federally insured banks or credit unions. Also included: ACH items in transit, cash in armored car transport, cash in smart safes, and money market mutual funds rated AAA by S&P or equivalent.
Certificates of deposit and senior bank debt. CDs or senior debt obligations issued by FDIC-insured depository institutions or federally insured credit unions.
U.S. government obligations. Treasury bills, notes, and bonds, plus obligations of federal agencies or instrumentalities. State and municipal government bonds sit in this same unrestricted tier.
Irrevocable standby letters of credit. The full drawable amount of a letter of credit naming the state banking commissioner as beneficiary, payable on a sight draft within seven days.
Surplus surety bond value. The portion of a surety bond that exceeds the transmitter’s average daily money transmission liability in the state.

What ties these assets together is that each is either government-backed, federally insured, or immediately convertible to cash with minimal risk of loss.¹ A portfolio built entirely from this list will never trip a concentration limit.

Assets That Qualify With Caps

The second tier includes assets that count as permissible investments but only up to specified percentages of the total portfolio.

Authorized delegate receivables, up to 50%. Money owed to the transmitter from its agents in the ordinary course of business, but only if the receivable is less than seven days old. No more than 10% of the portfolio can come from a single delegate.
Rated commercial investments, up to 20% each and 50% combined. This category covers short-term investments maturing within six months, commercial paper, rated corporate bonds and debentures, U.S. tri-party repurchase agreements collateralized at 100% or more with government or investment-grade securities, and money market funds rated below AAA but at or above A-. Each subcategory is individually capped at 20%, and the whole group cannot exceed 50%.
Foreign depository institution cash, up to 10%. Cash held in banks outside the United States, but only if the transmitter received a satisfactory rating in its most recent examination and the foreign institution carries an eligible credit rating, is registered under the Foreign Account Tax Compliance Act, is not in a country under OFAC sanctions, and is not in a jurisdiction flagged as high-risk by the Financial Action Task Force.

The caps exist because these assets carry risks the first tier does not. Delegate receivables and corporate debt can default. Foreign deposits sit outside the FDIC safety net. A transmitter that loads up on capped assets without watching the percentages can fall out of compliance even though every individual holding is technically permissible.¹

Why the List Looks the Way It Does

The narrow asset list makes more sense once you see what it is protecting. Under the MTMA, permissible investments are deemed held in trust for the benefit of customers by operation of law, even when commingled with the transmitter’s other assets. If a transmitter enters bankruptcy, reorganization, or receivership, no creditor can attach, levy, or seize those assets. They belong to the consumers whose money is in transit.¹

The trust runs across state lines. When it is triggered, the state commissioner notifies regulators in every state where the transmitter holds a license, and the assets are distributed pro rata among customers in all affected states. The trust terminates only once every outstanding obligation has been satisfied. That is the practical reason the eligible asset list skews so heavily toward government-backed and insured instruments: regulators want a portfolio that can actually pay customers out, quickly, if the transmitter fails.

Stablecoin Reserves Are a Separate, Narrower List

If you are researching this topic because you issue a payment stablecoin, the reserve rules under the GENIUS Act are a separate framework, not the same as MTMA permissible investments. Many stablecoin issuers hold state money transmitter licenses, so both regimes can apply, but the eligible reserve list for stablecoins is narrower.

Under the GENIUS Act, a permitted payment stablecoin issuer must back every outstanding stablecoin at least one-to-one, using only:²

U.S. coins and currency, including Federal Reserve notes
Balances at a Federal Reserve Bank
Demand deposits at insured banks or insured shares at credit unions
Treasury bills, notes, or bonds with a remaining maturity of 93 days or less
Overnight repurchase and reverse repurchase agreements backed by short-term Treasuries
Government money market funds invested solely in the assets listed above
Tokenized versions of these same reserve types, provided they comply with applicable law

The FDIC’s implementation guidance adds a counterparty concentration limit: no more than 40% of total reserve assets at any single financial institution. Issuers must also hold a separate operational backstop of liquid assets equal to twelve months of total operating expenses, outside the reserves.³ The 93-day maturity cap on Treasuries is the sharpest departure from the MTMA rules, which set no maturity limit on government obligations. Stablecoin reserves are built to be liquidated within hours.

What Happens If Coverage Slips

Falling below 100% permissible investment coverage is a licensing violation in every state that follows the MTMA. The transmitter is expected to restore compliance immediately by adding assets. Regulators do not wait for the next quarterly report to find out. Examination findings, market events, or tips from other state regulators can all prompt an emergency review.

In serious cases, the state commissioner can establish the statutory trust over all permissible investments, which effectively freezes the company’s ability to operate while customer obligations are worked through. A compliance shortfall that becomes public is usually not a fine-and-move-on event. For most transmitters, it is existential.

1
Conference of State Bank Supervisors. CSBS Model Money Transmission Modernization Act
2
Congress.gov. Text – S.1582 – 119th Congress (2025-2026): GENIUS Act
3
Federal Register. GENIUS Act Requirements and Standards for FDIC-Supervised Permitted Payment Stablecoin Issuers and Insured Depository Institutions