Google has walked back its intention to license all crypto wallets, including non-custodial wallets, on Play Store. The reversal follows industry criticism and confusion regarding the scope of the policy.
In its updated statement, Google says it is trying to clarify things for its users. “Non-custodial wallets are not in scope of Google Play’s Cryptocurrency Exchanges and Software Wallets Policy. We are updating the Help Center to make this clear,” the company said.
Google makes a U-turn on non-custodial wallet ban
In an earlier notice, Google stated that the new Play Store requirements required wallet developers to obtain official financial services licenses before their apps could be published. The regulation was expected to cover 15 jurisdictions, such as the U.S. and the EU, but did not distinguish between custodial and non-custodial wallets, which raised concerns among developers and lawyers.
In the United States, the policy would have required registration with the Financial Crimes Enforcement Network (FinCEN) as a Money Services Business (MSB) and a state permit for money transmitters. Such precautions are common in the custodial services space, but are not legally obligatory for non-custodial wallets under the FinCEN rule in 2019.
Consensys attorney Bill Hughes voiced his disappointment over the lack of clarity in the policy. He explained that Google informed them of the update on July 10, without defining what constitutes a “software wallet.” Hughes also noted that MSB registration is not something the FinCEN has expressly and explicitly required, and that the rule would thus be an unusual turnaround compared to existing United States regulatory policy.
He also referred to Google’s general policy that cryptocurrency-related activities are supposed to be performed by certified services in regulated jurisdictions. However, certification is not necessarily legally required. Hughes said the policy is “a bit of a mess,” and cautioned that Big Tech platforms, rather than government agencies, could potentially be the biggest gatekeepers in crypto application distribution.
Reversal shows influence from the crypto industry
Meanwhile, in the European Union, the original Google policy would have seen wallet developers obtain a mandatory Crypto Asset Service Provider (CASP) license under the Markets in Crypto-Assets (MiCA) regulation. The policy would have prohibited many independent developers who do not enjoy CASP from listing their apps, since they are not custodial wallets. The proposal is also similar to aspects of the Financial Action Task Force (FATF) ideas to extend scrutiny on virtual asset service providers.
The move by Google to withdraw non-custodial wallets due to the licensing requirement is a result of increasing opposition among legal experts, cryptocurrency advocacy organizations, and industry leaders. Justin Slaughter, the regulatory affairs vice president of Paradigm, had condemned the move as being too limiting, particularly as Google battles antitrust litigation.
He termed it “surprising” that the company would enforce these rules at this time, labeling them as “draconian limitations” to developers of non-custodial wallets. Slaughter cited pending congressional proposals that declare that “pure coding should not require a federal license,” implying that the policy may be incompatible with the prospective congressional guide.
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