In the United States, the policy requires that "the developer must be either (a) registered with FinCEN as a Money Services Business and with a state as a money transmitter or (b) a federal or state chartered bank entity." An MSB registration then requires entities to adhere to strict Anti-Money Laundering (AML), Counter Terrorist Financing (CTF), and Know Your Customer frameworks (KYC).Google's policy thereby goes well beyond what is required of non-custodial wallets by law. As clarified in FinCEN's 2019 guidance on Convertible Virtual Currencies, FinCEN makes clear distinctions between "hosted" (meaning custodial) and "unhosted" (meaning non-custodial) wallets, which it does not classify as money transmitters.As the number one cost point for financial institutions, the compliance programs required of MSBs by FinCEN would drive the majority of non-custodial wallets out of the Play Store, stifle free software innovation to a crippling degree, and force AML/KYC on all non-custodial wallets available on out-of-the-box Google devices.
In the EU, they're effectively disallowing non-custodial wallets entirely:
In the EU, the Policy states that "the developer must be authorised as a crypto-asset service provider (CASP) under the markets in crypto-assets (MiCA) regulation by a relevant national competent authority. Any other local legal requirements, including any national-level restrictions or requirements beyond MiCA, must also be complied with."
Licensing burdens aside, a MiCA license would thereby not be issued to a simple non-custodial software wallet, effectively excluding all non-custodial wallet developers from offering software in the Google Play Store in the EU, leaving licensed CASPs as the only organizations to be able to offer non-custodial wallets for the Play Store.
Banger at the end:
After the attempted (and partially successful) regulation by prosecution in the US to force non-custodial software under existing regulatory regimes, we appear to now be entering the era of regulation by commercial enforcement, where non-custodial software is required to comply with custodial regulations not by law, but by monopoly.
This reminds me of the censorship complex we saw emerge over the last decade: transnational corporations barter with the freedoms of customers to avoid prosecution on the basis of monopoly and for-profit violations of customer rights.