Google Play's New Licensing Rules Threaten Non-Custodial Crypto Wallets In US, EU

Alphabet Inc.‘s GOOG GOOGL Google has introduced new licensing requirements for cryptocurrency wallet applications on its Play Store, a move critics argue could block many non-custodial wallets from reaching users in key markets.

The updated policy applies to developers in 15 jurisdictions, including the United States and the European Union, and mandates compliance with local licensing frameworks, according to The Rage.

In the US, developers must either be registered as a Money Services Business (MSB) with FinCEN and licensed as a money transmitter at the state level, or operate as a federally or state-chartered bank.

In the EU, wallet providers must hold authorization as a Crypto Asset Service Provider (CASP) under the Markets in Crypto-Assets (MiCA) regulation.

While these rules are in line with custodial wallet and exchange requirements, they go far beyond what is legally mandated for non-custodial wallets, software that gives users sole control of their funds.

FinCEN's 2019 guidance clearly states that unhosted wallets are not money transmitters and therefore not subject to MSB licensing.

In practice, the new Play Store rules could impose AML/KYC obligations on wallets that, by design, never hold user funds in custody.

Critics warn that the compliance burden could push most independent wallet developers out of the Play Store, narrowing distribution to only licensed financial institutions and exchanges.

In the EU, the effect could be even more severe, as a MiCA license is not typically granted to pure non-custodial wallet providers.

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Industry observers link Google's policy to recommendations by the Financial Action Task Force (FATF), an intergovernmental body that sets global anti-money laundering standards.

FATF guidance from 2021 expanded its definition of Virtual Asset Service Providers to potentially include non-custodial wallet front ends, arguing that developers may retain some degree of "control" via user interface or launch functions.

Although FATF standards are not legally binding, member countries often implement them to avoid sanctions or being placed on watch lists.

Critics argue the Google policy represents "regulation by commercial enforcement," where private platforms enforce rules beyond what the law demands, effectively shaping the market through monopoly power.

The move follows high-profile legal and regulatory pressure on privacy-focused and non-custodial wallet providers in the U.S.

Recently, filings in the Samourai Wallet case indicated that FinCEN itself had told prosecutors the developers likely did not require an MSB license, a point defense lawyers say was initially withheld.

For now, developers without costly compliance infrastructure may find themselves shut out of Android's largest app marketplace in two of the most important crypto markets.

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