Square has received a cease-and-desist order from regulators in Illinois because it does not have a licence to offer what is termed money transmission services to customers in the US state.

The order, which was issued in January 2013, was spotted by blogger and former Citi banker Thomas Noyes. It was issued by the Illinois Department of Financial & Professional Regulation.

According to the regulator’s findings, “Square provides credit card reading devices to Illinois consumers for the express purpose of transmitting money”. It is one of a number of competitors providing similar services across the States.

The regulator has the authority “to assess penalties of $1,000 against Square for each violation of the act”, or penalties of $1,000 per day. And, it says, it can assess penalties against the company that are equal to “four times the amount of money transmitted for the entire period of unlicensed activities”.

But Noyes argues the regulator has made a mistake: He tweeted that “they (Square) are a merchant agent in a card-based commerce transaction. They never take possession of funds but send instructions”.

Square said it has been in contact with the Illinois for “several months” and is addressing their concerns.