Google U-Turns on Non-Custodial Wallet Ban After Industry Backlash

Google Walks Back Controversial Policy

Google has officially reversed its decision to require all crypto wallet apps — including non-custodial wallets — to obtain financial services licenses before being listed on the Play Store. The move follows intense backlash from developers, legal experts, and industry advocates who warned the policy could crush independent innovation.

The original rule made no distinction between custodial and non-custodial wallets, meaning developers of even basic software wallets could have been subject to strict licensing laws in 15 jurisdictions, including the U.S. and EU.

Legal Hurdles Raised Red Flags

Under the initial policy, U.S.-based wallet developers would have needed Money Services Business (MSB) registration with FinCEN and state-level money transmitter licenses — requirements typically reserved for custodial wallet services that hold user funds.

Bill Hughes, an attorney at Consensys, said Google had informed them of the policy on July 10 without defining what exactly qualifies as a “software wallet.”

Hughes called the rollout “a bit of a mess” and cautioned that Big Tech companies, not government agencies, could become the biggest gatekeepers in crypto app distribution.

EU Developers Would Have Faced Even Tougher Barriers

In the European Union, the original policy would have forced wallet developers to obtain a Crypto Asset Service Provider (CASP) license under the MiCA regulation — a costly and time-consuming process.

Since non-custodial wallets do not hold user funds, many smaller developers would have been blocked from the Play Store entirely. Critics compared the proposal to elements of the Financial Action Task Force (FATF) recommendations, which seek to extend regulatory oversight to a broader range of crypto service providers.

Industry Pushback Forces Google’s Hand

Google’s reversal reflects the growing influence of crypto industry voices in shaping policy. Justin Slaughter, vice president of regulatory affairs at Paradigm, condemned the initial move as “draconian limitations” on non-custodial wallet developers — especially at a time when Google is facing antitrust litigation. 

He called it “surprising” that Google would push such restrictive rules now and pointed to pending congressional proposals affirming that “pure coding should not require a federal license.”

A Win for Open Access, but Questions Remain

The policy rollback is being hailed as a victory for open-source development and user sovereignty. Still, developers remain cautious, noting that Google’s centralized control over app distribution means similar rules could return in the future. 

While Google’s clarification removes the immediate threat to non-custodial wallet apps, the incident underscores how platform-level policies can have sweeping effects on the crypto ecosystem — even without new government laws.