Crypto Wallets Face Google Play Ban Without Federal Licenses Across 15 Jurisdictions

The Google Play Store announced on Wednesday a new policy mandating that developers of cryptocurrency wallet applications secure a license before their software can be published. 

This policy is particularly focused on 15 jurisdictions, including the European Union (EU) and the United States, and delineates specific regulatory frameworks that developers must adhere to in order to participate in the platform.

Google Tightens Regulations On Crypto Wallets

The new requirements stipulate that developers in the US must register as a Money Services Business (MSB) with the Financial Crimes Enforcement Network (FinCEN) and comply with stringent Anti-Money Laundering (AML), Counter Terrorist Financing (CTF), and Know Your Customer (KYC) protocols. 

This represents a significant hurdle for non-custodial wallet developers—those not holding users’ funds—who, under FinCEN’s 2019 guidance, are not classified as money transmitters. 

As a result, the policy imposes compliance demands that far exceed existing legal requirements, effectively putting many non-custodial wallets at risk of being excluded from the Play Store.

According to recent reports, by enforcing such standards, Google risks stifling innovation in the cryptocurrency space and limiting the availability of non-custodial wallets to users. 

It is believed that developers may find the costs associated with compliance prohibitive, leading to a significant reduction in the diversity of wallet options available on Google devices.

Regulation By Commercial Enforcement?

In the European Union, the situation mirrors that of the United States. Developers are required to obtain authorization as a Crypto Asset Service Provider (CASP) under the Markets in Crypto-Assets (MiCA) regulation from relevant national authorities. 

However, this licensing framework is tailored for entities that manage or hold custody of digital assets, effectively excluding simple non-custodial wallets from obtaining the necessary licenses. Consequently, only licensed CASPs will be able to offer wallet services on the Play Store in the EU, further narrowing the market.

This policy aligns closely with the recommendations set forth by the Financial Action Task Force (FATF), which provides guidance on managing risks associated with virtual assets and their service providers. 

While FATF’s recommendations are not legally binding, they serve as a regulatory framework for countries to develop their own regulations. 

This creates a complex landscape where commercial entities like Google may enforce compliance measures that go beyond statutory requirements, driven by the desire to mitigate risk and maintain a secure ecosystem.

Moreover, the FATF has acknowledged that even decentralized applications (dApps) may have a central party that exercises some level of control, blurring the lines between custodial and non-custodial services. 

This ambiguity complicates the regulatory environment further, as developers may find themselves subject to custodial regulations despite not directly managing user funds.

Overall, the introduction of these licensing requirements by major platforms like Google marks a shift towards what could be termed “regulation by commercial enforcement.” 

Featured image from DALL-E, chart from TradingView.com