Google Play Store recently introduced a new policy that mandates developers of cryptocurrency wallet apps to obtain licenses before their apps can be published. This policy specifically targets 15 jurisdictions, including the European Union (EU) and the United States, outlining regulatory requirements developers must meet to be included on the platform.
Under the new regulations, developers in the US must register as Money Services Businesses (MSBs) with the Financial Crimes Enforcement Network (FinCEN) and comply with Anti-Money Laundering (AML), Counter-Terrorist Financing (CTF), and Know Your Customer (KYC) protocols. These requirements pose a challenge for non-custodial wallet developers, who do not hold users’ funds and are not considered money transmitters according to FinCEN’s 2019 guidelines.
By imposing stringent compliance standards, Google’s policy may hinder innovation in the cryptocurrency sector and restrict the availability of non-custodial wallets for users. The high costs associated with meeting these regulations could lead to a reduced variety of wallet options on Google devices.
Similarly, in the EU, developers are required to secure authorization as Crypto Asset Service Providers (CASPs) under the Markets in Crypto-Assets (MiCA) regulation from national authorities. This framework is designed for entities managing or holding custody of digital assets, excluding simple non-custodial wallets from obtaining licenses and allowing only licensed CASPs to offer wallet services on Google Play Store in the EU.
The alignment of these policies with recommendations from the Financial Action Task Force (FATF) underscores efforts to manage risks related to virtual assets and their service providers. While not legally binding, FATF’s recommendations guide countries in developing their own regulations, creating a regulatory landscape where commercial entities like Google may enforce measures exceeding legal requirements to enhance ecosystem security.
The complexity of distinguishing custodial and non-custodial services, even in decentralized applications (dApps), adds another layer of challenge for developers navigating regulatory frameworks. This evolving environment signals a shift towards “regulation by commercial enforcement,” as major platforms like Google set stricter licensing requirements for crypto wallet apps.
