Crypto wallets to offer a backdoor recovery if buried amendment to state bill passes Senate

Kentucky lawmakers are considering HB 380, a bill initially aimed at consumer protection for cryptocurrency kiosks, which includes a controversial amendment (House Floor Amendment 3). This amendment requires hardware wallet providers to offer assistance with resetting passwords, PINs, or seed phrases, effectively mandating a recovery mechanism. Critics argue this contradicts a previous state law (HB 701) that protects self-custody and independent control of wallets, potentially forcing manufacturers to build backdoors into their products. The Bitcoin Policy Institute has warned that compliance would necessitate storing seed phrases or creating remote reconstruction paths, compromising security. The Senate has a limited window to amend or remove Section 33 of the bill before it becomes law, potentially impacting the availability of self-custody options for Kentuckians and setting a precedent for other states.

(Source：CryptoSlate)