The law specifically states that the tangible net worth requirement is a floor, not a ceiling; like the surety bond requirement, it scales up with transaction volume and net receivables. The DFI FAQ basically says that in practice the minimum is more like $1MM.
There is a reasonable-seeming concern in this post: the California DFI has effectively unpublished tangible net worth requirements, and ostensibly the only way to find out what they are is to apply for a license and be rejected --- which is something you have to disclose on all future applications even in other states.
The notion of "tangible net worth" requirements is the flip side to the 2008 complaint about banks being able to overleverage and thus create "too big to fail" scenarios. The subtext, I think, of the DFI's fuzzy requirements is: if you meet the tangible equity requirements, you know you do. For the types of businesses we're talking about, $500k is a joke (can you imagine Paypal being backed by sums denominated in the single-or-double-digit hundreds of thousands?) It's simply very expensive to be a money transmitter in a state as big and dynamic as California.
This seems to be the same sort of thing people were[0] complaining about with Apple's app store policies; that it was effectively impossible to know the outcome of the approval process without having to invest a large amount of time and money in advance.
[0] It is my impression that the process has been improved to the satisfaction of most people who can be satisfied with such a process.
Maybe (I'm not a huge fan of regulation in general, but I can see some use for it here), but that doesn't mean the concept is any different. If you need permission to do something, the process for obtaining that permission should be clear enough that you can know whether you will be approved before you request it. This is doubly true when the entity granting said permission is a government and the permission is necessary to conduct business.
I'm not saying some sort of licence shouldn't be required - just that you should be able to figure out whether it will be approved or denied before you apply for it.
There is a reasonable-seeming concern in this post: the California DFI has effectively unpublished tangible net worth requirements, and ostensibly the only way to find out what they are is to apply for a license and be rejected --- which is something you have to disclose on all future applications even in other states.
The notion of "tangible net worth" requirements is the flip side to the 2008 complaint about banks being able to overleverage and thus create "too big to fail" scenarios. The subtext, I think, of the DFI's fuzzy requirements is: if you meet the tangible equity requirements, you know you do. For the types of businesses we're talking about, $500k is a joke (can you imagine Paypal being backed by sums denominated in the single-or-double-digit hundreds of thousands?) It's simply very expensive to be a money transmitter in a state as big and dynamic as California.