After generating some controversy with its initial announcement, Google has clarified its rules regarding crypto wallets in its app store.
Google Play will require crypto wallet companies in many regions, including the United States and the European Union, to be licensed with their domestic regulators and comply with industry standards.
U.S. wallet providers would need to be recognized by the Financial Crimes Enforcement Network (FinCEN) as a money services business and authorized by with their state as a money transmitter, unless the company is a federally- or state-chartered bank.
UK providers must gain approval from the Financial Conduct Authority (FCA), while EU crypto wallet companies will have to register as a crypto-asset service provider (CASP) under the region’s recently passed Markets in Crypto-Assets (MiCA) framework.
Concerns Over Wallet Rules
There was pushback against this policy from the crypto community because Google initially didn’t clarify whether the rules would apply to both custodial and non-custodial wallets. This prompted some non-custodial wallet providers to question the rules, noting that self-custodial wallets currently don’t require a license under U.S. law.
After these concerns were raised, Google updated its policy to state that non-custodial wallets don’t fall under the purview of the rules, which are set to take effect in October.
The Compliance Tradeoff
There have been a slew of regulatory efforts around digital assets globally, including the MiCA enactment and the passage of the GENIUS Act in the U.S. These efforts have generally been lauded by the crypto community after years of regulatory uncertainty, which many feel has kept digital assets from becoming a mainstream financial product.
While regulatory clarity will likely bring crypto to a larger audience, it will also increase the compliance burden on crypto companies.
For example, there are substantial reporting requirements for firms before they can be registered as a money services business with FinCEN. Crypto wallet companies will have to develop an anti-money laundering plan, create Suspicious Activity Reports (SARs), and perform Know Your Customer (KYC) checks, among other functions.
This means that many crypto firms, which have been built on a decentralized infrastructure, will have to weigh whether inclusion in Google Play is worth the compliance tradeoff.
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