Kentucky is facing controversy over House Bill 380, which could force hardware wallet makers to include a “backdoor” to recover users’ seed phrases.
Key points:
- The bill, introduced by Reps. Aaron Thompson and Tom Smith, requires providers to assist users in resetting passwords, PINs, or seed phrases.
- Bitcoin Policy Institute (BPI) says this is technically impossible for non-custodial wallets, since no one can access a user’s private keys without their cooperation.
- BPI warns the law could undermine self-custody, pushing users toward centralized solutions that limit control over their assets.
- Identity verification would be required for users requesting recovery, but the fundamental issue remains: hardware wallets are designed so recovery without the user is not feasible.
Self-custody debate:
- Advocates see it as a fundamental right to control private keys.
- Regulators have mixed views: California recently added protections for self-custody, while the SEC warns users about custody risks—losing private keys means permanent loss, but custodial services carry their own risks like hacks or insolvency.
In short: HB 380 raises serious concerns about security and user control, with critics urging lawmakers to remove the backdoor requirement before a vote.
