Furthermore, the policy requires software wallet developers to comply with local financial regulations “to ensure a safe and compliant ecosystem for users.”
The requirements apply to both custodial and non-custodial wallets, creating compliance burdens that many developers cannot meet.
In the US, developers must register with FinCEN as a Money Services Business (MSB) and obtain state money transmitter licenses, or operate as federally or state-chartered banking entities.
MSB registration requires adherence to strict Anti-Money Laundering, Counter Terrorist Financing, and Know Your Customer frameworks.
The report noted that Google’s requirements extend beyond current legal obligations for non-custodial wallets.
FinCEN’s 2019 guidance on Convertible Virtual Currencies distinguishes between “hosted” custodial and “unhosted” non-custodial wallets, explicitly stating that non-custodial wallets do not qualify as money transmitters under existing regulations.
The compliance programs required of MSBs represent the highest cost burden for financial institutions and would effectively exclude most non-custodial wallet developers from the Play Store.
The policy forces AML and KYC requirements on all non-custodial wallets available through standard Google devices.
Hughes observed that registering as an MSB is “something FinCEN has specifically and clearly not required” for non-custodial wallets.
He added:
“They don’t define the term and do not acknowledge that registering as an MSB is something FinCEN has specifically and clearly not required.”
He noted Google’s broader statement that cryptocurrency activities “should be conducted through certified services in regulated jurisdictions,” despite certification not being legally required.
Hughes characterized the situation as “a bit of a mess” and warned that “the final boss for crypto is now more likely to be the Big Tech platforms that still dictate the major crypto app distribution channels.”
He said:
“Surprising move here by Google, especially amid their antitrust litigation, to suddenly place draconian restrictions on persons making non-custodial wallets available on the App Store.”
