When an embedded wallet makes your app a custodian.

Article 67(1) requires prudential safeguards, at all times, equal to the higher of that Annex IV amount and one quarter of the fixed overheads of the preceding year. A firm that has not been in business for one year uses the projected fixed overheads for its first 12 months (Article 67(2)). Safeguards may be Common Equity Tier 1 own funds, an insurance policy, or both (Article 67(4)). Where insurance is used, it must cover liability to clients under Article 75(8) (Article 67(6)(g)).

Article 75(8) makes a custody provider liable to its clients for the loss of any crypto-assets, or of the means of access to them, resulting from an incident attributable to the provider. Liability is capped at the market value of the crypto-asset at the time the loss occurred. The provider can point to an incident it shows occurred independently of the service, including a problem inherent in a distributed ledger it does not control. Article 75 also requires a client agreement, a register of positions, a custody policy, segregation of client holdings from the provider’s own, and procedures to return assets or the means of access. Article 74 requires an orderly wind-down plan for providers of the services in Articles 75 to 79, which includes custody.

Recital 83 says providers of non-custodial wallet hardware or software should sit outside MiCA. A recital is not the article. If you safekeep client assets or private keys, Article 3(1)(17) still calls it custody.

Moving crypto for a customer, from one address to another, is its own service under Article 3(1)(26). It sits in Class 1, at EUR 50,000, even if you are not the custodian. MiCA never says whether broadcasting a transaction the user already signed counts.

FIN-2019-G001, section 4.2.1, describes hosted wallet providers as account-based money transmitters that receive, store, and transmit convertible virtual currency on behalf of their accountholders. In that model the value belongs to the owner, the owner interacts with the host rather than with the payment system, and the host has total independent control over the value, although it is contractually obligated to access the value only on the owner’s instructions.

The same section describes unhosted wallets as software on a person’s device that does not require an additional third party to conduct transactions. For an unhosted single-signature wallet, the value is the owner’s, the owner interacts with the payment system directly, and the owner has total independent control. A person conducting a transaction through that wallet to purchase goods or services on their own behalf is not a money transmitter.

Section 4.2.2 covers multiple-signature providers. If the provider’s role is limited to creating unhosted wallets that require a second authorization key, and the provider does not have total independent control, FinCEN says the provider is not a money transmitter because it does not accept and transmit value. The next sentences draw the line the other way: if the provider also operates as a hosted wallet, if the value is an entry on the provider’s books, if the owner does not interact with the payment system directly, or if the provider has total independent control, the provider is a money transmitter regardless of the label it uses.

Federal MSB registration is not a state license. A June 2026 guide by Astraea Counsel, citing FinCEN, states that registration on Form 107 carries no government fee, and that the anti-money-laundering program behind it is a separate cost. The same guide’s cost ranges for a broad multi-state money-transmitter licensing effort are order-of-magnitude practitioner estimates, which the authors say are not statutory amounts and vary by state and by transaction volume:

The Digital Financial Assets Law prohibits a person from engaging in digital financial asset business activity with or on behalf of a California resident unless licensed or otherwise covered. The Department of Financial Protection and Innovation’s FAQ states that Assembly Bill 1934 moved that license date to 1 July 2026. “Digital financial asset business activity” includes exchanging, transferring, or storing a digital financial asset (Financial Code section 3102(h)).

Exchange and transfer, as defined in section 3102(i) and 3102(v), both require assuming control of the asset from or on behalf of a resident. Store requires maintaining that control for the resident. Control, in section 3102(c)(1), is the power to execute a digital financial asset transaction unilaterally, or to prevent one indefinitely, with a narrow exception for terminating or interrupting a transaction solely in response to unauthorized or fraudulent activity.

Section 3103 lists exemptions. Two that wallet teams read first, and that have to be matched to the actual product:

• A person that contributes only connectivity software or computing power to securing a network that records digital financial asset transactions, or to a protocol governing transfer of the digital representation of value (section 3103(b)(7)(A)).
• A person whose digital financial asset business activity with or on behalf of residents is reasonably expected to be valued, in the aggregate, at $50,000 or less per year, measured by the US dollar equivalent of the digital financial assets (section 3103(b)(9)). The statute measures the assets, not your revenue.

DFPI expects $100,000 of tangible net worth to open an application, and says it will set a final amount later under section 3207(b). You also need a surety bond or a trust account. DFPI picks that amount. Neither the statute nor the DFPI pages we checked print one number for it.

The FCA states that the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 were made on 4 February 2026, and that the full scope of regulated cryptoasset activities expands from 25 October 2027.

Policy Statement PS26/12 (June 2026) sets the permanent minimum capital requirement for a firm with permission for safeguarding cryptoassets at £150,000 (CRYPTOPRU 4.2.1R). Where more than one permission applies, the permanent minimum is the highest applicable figure in that table. The own-funds requirement is the highest of the permanent minimum, one quarter of relevant expenditure (the fixed-overheads requirement), and the K-factor requirement. For a firm safeguarding cryptoassets, the K-RCS requirement equals 0.04% of its average cryptoassets safeguarded (CRYPTOPRU 4.5.1R).

PS26/12 never exempts non-custodial wallet software. The £150,000 and the 0.04% apply to firms that hold the safeguarding permission.

FATF’s October 2021 guidance is what national AML rules implement. It is not itself a license. Paragraph 41 treats safekeeping as exclusive or independent control of someone else’s private key. Paragraph 48 leaves out hardware-wallet makers and non-custodial wallet providers, unless they also exchange, transfer, or safekeep for customers as a business.

The Cavos backend is not allowed to move user funds or enroll itself as a signer. On Solana the relayer pays fees. It does not spend. Registries, recovery, paymasters, and relayers can coordinate a transaction. They cannot authorize one.

Recovery is opt-in, and it is a different path. On Solana and Stellar the enclave seals a MasterDEK and can unwrap it. If that wrap is compromised, the spend key can be restored. On Starknet the enclave may schedule one add_signer. The contract still enforces nonce, expiry, timelock, cancellation, and finalization. The docs call this hardware-isolated and non-custodial, and they say it is not trustless: the user is relying on the measured enclave image and on AWS attestation. A Cavos employee has no key to hand over. The key material is sealed to that measurement.

Anyone applying MiCA, FinCEN, or California’s control test has to read that recovery path, not only the ordinary spend. Nothing here says a Cavos integration is unlicensed. Exchange, fiat on-ramps, and payments are their own activities even when the user signs the wallet.

Provider comparisons of signing models, chains, and recovery are on the compare pages. The security write-up is in the concepts and hardware-isolated recovery docs.