Kentucky House Bill 380 includes last-minute amendments that would require crypto hardware wallet makers to offer built-in recovery options, the Bitcoin Policy Institute (BPI) warned. The change to Section 33 obliges hardware wallet providers to provide a mechanism for, and assist owners with, resetting any password, PIN, seed phrase, or other information needed to access a wallet. The amendment was added on the floor and the bill is sponsored by state Representatives Aaron Thompson and Tom Smith.
The measure also would require identity verification checks for anyone requesting a password, seed phrase, or PIN reset from a hardware wallet manufacturer.
BPI responded that the mandate is technically infeasible for true non-custodial hardware wallets. By design, hardware wallets prevent manufacturers from accessing or recovering a user’s seed phrase; forcing a recovery mechanism would undermine that architecture, BPI said. The group warned the provision threatens self-custody of private keys — a core principle of cryptocurrencies — and could steer users toward centralized custodians that are more exposed to hacks and business failures.
Officials at the U.S. Securities and Exchange Commission have defended the right to self-custody. Former SEC Chair Paul Atkins has voiced support for market participants maintaining self-custody options when intermediaries impose financial or operational burdens. In November 2025, SEC Commissioner Hester Peirce, who leads the regulator’s Crypto Task Force, reaffirmed the importance of self-custody and financial privacy, calling them foundational to freedom and questioning why people should be forced to rely on others to hold their assets.
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