Non-Custodial Lightning Payment Software
SatsRail is a software platform that generates Lightning Network payment invoices on behalf of merchants using the merchant's own non-custodial wallet, and listens to the public Lightning Network to confirm whether payment has arrived. SatsRail does not move, hold, control, route, or transmit Bitcoin at any point.
SatsRail does not operate Lightning nodes, does not hold private keys, does not take custody of funds, and does not participate in the payment routing process. SatsRail is a read-only observer of a public monetary network with the ability to generate payment requests on behalf of merchants.
Based on a detailed review of FinCEN Guidance FIN-2019-G001 (May 9, 2019), SatsRail's software-only, non-custodial, observer model does not constitute money transmission under federal BSA regulations and therefore does not require registration as a Money Services Business (MSB) or a federal money transmitter license.
SatsRail performs exactly two functions:
That is the entirety of SatsRail's involvement in the payment process. Everything else — the movement of Bitcoin, the routing of payments, the settlement of funds — happens entirely on the Lightning Network between the customer's wallet and the merchant's wallet, without any SatsRail participation.
| Step | Action | SatsRail's Role |
|---|---|---|
| 1 | Customer initiates purchase at merchant's point of sale | None |
| 2 | SatsRail calls the Breez SDK API to generate a Lightning invoice from the merchant's own wallet | Invoice generation (software API call) |
| 3 | Customer pays the Lightning invoice from their own wallet | None — payment routes through Lightning Network independently |
| 4 | Bitcoin settles directly into the merchant's non-custodial wallet | None — SatsRail never touches funds |
| 5 | SatsRail observes the public network and confirms payment arrived | Read-only listener (observation only) |
| 6 | Merchant dashboard is updated to reflect completed payment | UI update (software display) |
As shown above, SatsRail's involvement is limited to two software operations: generating an invoice (Step 2) and observing the network (Step 5). At no point does Bitcoin pass through SatsRail-controlled infrastructure.
The following analysis is based on FinCEN Guidance FIN-2019-G001, "Application of FinCEN's Regulations to Certain Business Models Involving Convertible Virtual Currencies," issued May 9, 2019.
Under 31 CFR § 1010.100(ff)(5)(i)(A), money transmission services are defined as the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.
Money transmission requires two elements: (1) acceptance of value and (2) transmission of value. SatsRail performs neither. SatsRail does not accept Bitcoin from any person, and it does not transmit Bitcoin to any person or location. The actual movement of value occurs entirely between the customer's wallet and the merchant's wallet on the Lightning Network, without any SatsRail involvement.
Reference: 31 CFR § 1010.100(ff)(5)(ii)(A); FIN-2019-G001, Section 4.5.1(b)
FinCEN regulations explicitly exempt from the definition of money transmitter those persons providing the delivery, communication, or network access services used by a money transmitter to support money transmission services. The guidance further states that suppliers of tools (communications, hardware, or software) that may be utilized in money transmission are engaged in trade and not money transmission.
SatsRail is a supplier of software tools. It provides two specific software functions: (1) an API call that generates a Lightning invoice from the merchant's own wallet, and (2) a network listener that observes whether a payment has arrived. These are communication and network access services — precisely the category FinCEN exempts. SatsRail does not accept or transmit value; it creates a payment request and observes the result.
Reference: FIN-2019-G001, Sections 4.2.1 and 4.2.2
The FinCEN guidance identifies four criteria for determining whether a CVC wallet intermediary is a money transmitter. SatsRail's position is even stronger than a typical non-custodial provider because SatsRail is not a wallet provider at all — it is a software observer that interfaces with the merchant's existing wallet.
| FinCEN Criteria | Money Transmitter (Hosted Wallet) | SatsRail |
|---|---|---|
| (a) Who owns the value? | Host holds on behalf of owner | Merchant owns all value — SatsRail never holds any |
| (b) Where is value stored? | In wallet or host's accounts | In merchant's own non-custodial wallet — SatsRail has no storage |
| (c) Does owner interact directly with payment system? | No — owner interacts through host | Yes — merchant's wallet interacts directly with Lightning Network |
| (d) Does intermediary have total independent control? | Yes — host controls value | No — SatsRail has zero control; it only observes |
Reference: FIN-2019-G001, Section 4.6
Section 4.6 classifies CVC payment processors as money transmitters — entities that collect CVC from the customer and then transmit currency or funds to the merchant. SatsRail does neither.
| Characteristic | CVC Payment Processor (Section 4.6) | SatsRail |
|---|---|---|
| Collects CVC from customer? | Yes | No — never touches Bitcoin |
| Transmits value to merchant? | Yes | No — merchant receives directly |
| Performs exchange/conversion? | Often (CVC to fiat) | Never |
| Has custody of funds? | Yes, temporarily | Never, at any point |
| Operates nodes? | Typically yes | No — does not run nodes |
| Revenue model | Per-transaction fees | SaaS subscription |
| Role in payment | Active intermediary | Passive observer |
| Classification | Money Transmitter | Software Provider |
Based on the analysis of FinCEN Guidance FIN-2019-G001, SatsRail does not meet the definition of money transmission under federal BSA regulations. The conclusion rests on three pillars:
SatsRail's software-only, non-custodial, observer architecture does not constitute money transmission under FinCEN Guidance FIN-2019-G001. SatsRail is not required to register as a Money Services Business (MSB) or obtain a federal money transmitter license.
Primary Source: FinCEN Guidance FIN-2019-G001, "Application of FinCEN's Regulations to Certain Business Models Involving Convertible Virtual Currencies," May 9, 2019.
Key Regulatory Citations: 31 CFR § 1010.100(ff)(5)(i)(A) (definition of money transmission); 31 CFR § 1010.100(ff)(5)(ii)(A) (software/tool provider exemption); FIN-2013-G001 (2013 VC Guidance).