Only monetized apps (whether that be directly paid, microtransactions, ads, etc.) are legally required to go through that process - and it's a perfectly sensible requirement for the government to say "if you want to run a business, you need to do so as a business".

That is most apps - but not the kind of apps Google is attacking here (personal-scale, actually-free, third-party, etc.). And "apps that are not monetized" is actually a very nice thing to filter for from a user perspective.

Of course, the world's largest malware vendors love to use government action as an excuse to do something else malicious.