I agree this is a substantial concern. Here I’ll restrict myself to explaining some of the possibly-relevant technical aspects of the current ZSA design, and giving a reference to the “money transmitter” definition. An important caveat is that the ZSA design may change before (or after) it activates on the Zcash network.
Properties of the current ZSA design
First note that ZSAs aren’t restricted to representing currency; they can also represent NFTs, and a ZSA could be used simply to provide a record of a chain of title, for example.
As far as the protocol is concerned, in the current design proposal, ZSAs work like ZEC with the following differences.
Fees
Transaction fees are always denominated in ZEC, not in a ZSA.
Shielding
Transfers of ZSA assets, excluding issuance and burning which are covered below, are always shielded.
Issuance
Issuance for each ZSA is controlled by an issuance authorizing/validating key pair, rather than being predetermined by consensus rules.
Issuance of a ZSA has the same privacy properties as a miner creating a ZEC shielded coinbase output. The issued note is not encrypted, so its destination address, asset identifier, and value are known. Its nullifier deriving key (\mathsf{nk}) is not revealed, and so the issuance transaction is not linkable to the transaction that spends the note, without additional information such as its incoming viewing key.
An authorized issuance action can permanently disable future issuance of its asset. For example, this might be used if the key is suspected to have been compromised, or if the issuance schedule for the asset requires it.
Burning
There is an explicit mechanism for verifiably burning ZSA assets.
The source of the burned funds assets is shielded; the amount is public.
Definition of “money transmitter”
(“Person” means a legal person including businesses.)
The definition of a money transmitter according to the BSA/AML General Definitions (which is what FinCEN refers to) is:
Money Transmitter - 1010.100(ff) (5)(i)
In general.
-
(A) A person that provides money transmission services. The term “money transmission services” means 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. “Any means” includes, but is not limited to, through a financial agency or institution; a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both; an electronic funds transfer network; or an informal value transfer system; or
-
(B) Any other person engaged in the transfer of funds.
(ii) Facts and circumstances; Limitations.
Whether a person is a money transmitter as described in this section is a matter of facts and circumstances. The term “money transmitter” shall not include a person that only:
-
(A) Provides the delivery, communication, or network access services used by a money transmitter to support money transmission services;
-
(B) Acts as a payment processor to facilitate the purchase of, or payment of a bill for, a good or service through a clearance and settlement system by agreement with the creditor or seller;
-
(C) Operates a clearance and settlement system or otherwise acts as an intermediary solely between BSA regulated institutions. This includes but is not limited to the Fedwire system, electronic funds transfer networks, certain registered clearing agencies regulated by the Securities and Exchange Commission (“SEC”), and derivatives clearing organizations, or other clearinghouse arrangements established by a financial agency or institution;
-
(D) Physically transports currency, other monetary instruments, other commercial paper, or other value that substitutes for currency as a person primarily engaged in such business, such as an armored car, from one person to the same person at another location or to an account belonging to the same person at a financial institution, provided that the person engaged in physical transportation has no more than a custodial interest in the currency, other monetary instruments, other commercial paper, or other value at any point during the transportation;
-
(E) Provides prepaid access; or
-
(F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.