@Sandra The project did not have to be shut down.
The developer could e.g,. have moved the app to the more appropriate "Communication" category in Play (used by browsers like Firefox, Chrome, et al) which doesn't have those requirements. They chose not to.
There are certainly issues with Play policies -- e.g., #pachli doesn't let you create an account in-app because there's no API to delete an account -- but this isn't one of them.