Following initial controversy with its announcement, Google has elaborated on its guidelines concerning crypto wallets in the Google Play Store.
The new rules mandate that many crypto wallet providers, particularly those based in regions like the United States and European Union, must obtain licenses from their respective domestic regulators and adhere to industry standards. This includes U.S.-based companies needing approval from the Financial Crimes Enforcement Network (FinCEN) as money services businesses and state authorization for money transmission, except where they are federally- or state-chartered banks.
In the United Kingdom, wallet providers will need the approval of the Financial Conduct Authority (FCA). Meanwhile, EU-based crypto wallets must register under the recently implemented Markets in Crypto-Assets (MiCA) framework.
Concerns over Wallet Rules
The crypto community has expressed concerns over these regulations, especially regarding the distinction between custodial and non-custodial wallets. Initially, it was unclear whether both types would be subject to licensing requirements. Some non-custodial wallet providers argued that their services, which do not require custody of users’ assets, should not fall under the same regulatory scrutiny as custodial models.
In response to these concerns, Google has clarified its policy to state that non-custodial wallets are exempt from these rules, effective from October.
The Compliance Tradeoff
These new regulations represent a significant step toward greater clarity in the crypto industry. Regulatory certainty is generally seen as beneficial for expanding digital assets into mainstream financial products after years of uncertainty. However, it also brings about increased compliance burdens on crypto companies.
To be recognized as money services businesses with FinCEN, firms must comply with extensive reporting requirements and develop comprehensive anti-money laundering plans, including creating Suspicious Activity Reports (SARs) and performing Know Your Customer (KYC) checks. This could present a substantial challenge for decentralized structures built by many crypto companies.
As such, many crypto firms will need to evaluate whether the benefits of being included in Google Play outweigh these compliance costs.