Faisal Khan is a payments consultant and digital money evangelist. He is the co-host of Around the Coin, a weekly podcast on banking, money and payments. He is also a frequent contributor to popular Q&A site Quora.

On October 27, 2014, the Financial Crimes Enforcement Network (FinCEN) released new guidance for custodial bitcoin exchanges and payment processors, ruling that such companies may be considered money services businesses under US law.

The few days since then have been very hectic. Besides fielding calls from lots of people, everyone is asking the same question. What can a bitcoin company, operating in the US, now do to get back to business?

In the points below, I look at the most important issues facing bitcoin companies under the guidance and consider the options.

Are you affected by the ruling?

One of the first questions you have to ask yourself is, are you affected by the recent ruling? You may need to seek a legal opinion (or two, or three) and be quite certain about the direction the opinion leans towards. There will be two options:

The ruling applies to you, get licensed

The ruling does not apply to you

Do not rely on a single legal opinion, no matter how good he/she/they may be. At the risk of being blunt, it is times like these that law firms and attorneys juice their clients. Get a second and third opinion.

Does the ruling affect your current operations/plans?

Are you yet to go live or are you live? If you’re yet to go live, you have your fair share of work carved out for you. If you were live and engaged in commercial transactions, the ruling could mean problems for you. You may need to stop commercial transactions all together.

This can be devastating for some. If you have a large payroll to deal with, or monthly recurring is high, you may want to consider shedding the excess weight off until you get licensed.

Can you move operations overseas?

For some businesses, the option to move operations (or business) overseas and be able to continue, might just be possible. Just don’t expect to pick up transactions/clients from the US that easily.

How long does licensing take?

The answer is not so simple. On average, the 50 states will take you between one to three years. For a few states you might be able to secure licenses in three to five months, but then again, how many of your clients are walking about in Utah or North Dakota?

States like Illinois, New Jersey, Florida, Massachusetts, Pennsylvania, etc. hover between six to 10 months. Heavyweights like Texas, New York and California, easily a year to 18 months (if not more). For example, if California does view your application and finds out your audit has expired and requests a new one, that can easily extend the time.

For New York, you will have to get the ‘BitLicense‘ when it comes out. California might offer its own BitLicense equivalent. Texas so far has no plans – or do they? One cannot be sure. They don’t advertise much. Everyone is playing the ‘wait and see’ game with how New York’s Department of Financial Services handles things.

Those who have applied for licenses, will testify that the process is brutal and frustrating at times – one that requires money and patience (in that order), and a little good luck.

What problems can one face?

No action by the regulator weeks after you submitted your application. Added delays. Audit report not acceptable. No commissioner to sign-off your application. Associate to go through your application not awarded. Missing information, please refile again. Missing fingerprints, please refile. Application being returned, please go through checklist as attached again (a lot of elements are not correct or missing).

Shampoo. Rinse. Repeat.

Then there are the highly important surety bond providers. Surety bond companies that the state regulators can work with is a small bunch – about 16 or so in total. You have to deal with their appointed agents, who then provide surety bonding to you. Because you are bitcoin, they may or may not decide to do business with you. If they all deny you (a very, very strong possibility) then you’re as good as dead.

Many states will not take any other form of a surety bond (like a certificate of deposit, cash, etc.) They all work in collusion. I have no fear in citing this. You’ll find out. There are some agents whom you should avoid like the plague, but then again, you will experience this yourselves.

Audits (security audits, financial audits) are a pain and cost a lot of money. Some will be outright rejected after the audit is done. Why? Because the person who conducted the audit is on the regulator’s s*** list. But they won’t tell you so. They’ll just re-word it and let you know that you need to find another auditor to work with.

Banking is also going to be one of your biggest woes. You’ll be hard pressed to find a bank that will work with you once they find out you are a licensed money transmitter. Even the bank accounts you have can be closed without warning. In fact, banking is one of the biggest challenges after licensing.

The pain points are many. Be prepared. Don’t say I didn’t tell you so.

How much money?

Plan on having lots of it. The whole licensing experience is all about spending a lot of money. Lawyers. Net Worth. Permissible Investments. Surety bonding. Insurance. Audits. Auditor fees. Specialists fees, etc.

If you have to raise this money, it will be difficult. Raising the necessary finance itself will add to the time period.

Can I become an authorized agent of an existing money transmitter license holder?

Sure you can. Theoretically this is possible. Practically, the value of a money transmitter license just went through the roof after the FinCEN ruling.

A couple of years ago, you would work with the like of Obopay (now it’s pretty much dead). PreCash isn’t doing anything in the bitcoin space. InComm will only make you an agent if you are promoting their products and that too is a sketchy ‘if’. Meracord won’t touch bitcoins. Large forex or money transfer companies that have money transmitter licenses will just not work with bitcoin companies.

You would be hard-pressed to find money transmitters in this space. One name I can provide that you can talk to is Megan Burton’s CoinX. She has licenses in 30-plus states for money transmission related to bitcoin.

Can I work with a nationwide chartered bank by OCC?

Sure you can. A nationally chartered bank by the OCC is exempt from money transmitter licenses, but then again, how many banks do you think would like to work with bitcoin-related companies?

If you find one. Hide it. Its a keeper. Don’t let anyone know.

The road to licensing is not easy. A few companies like CoinX had the vision to go and get licenses earlier on. Others were very sure of themselves based on the previous FinCEN ruling. Needless to say, the way things are right now, it seems clear the federal government has paved the way for states to declare you as money transmitters, and would not want you to pursue that path as well.

Its going to be tough. You will feel like giving up. You might just go broke. But don’t give up. There is light at the end of the tunnel.

This article, which originally appeared on Faisalkhan.com, has been republished here with permission from the author.

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.

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