Kentucky crypto bill draws backlash over wallet reset

Kentucky's HB 380 would force hardware wallet makers to enable credential resets, drawing backlash from crypto advocates who say this undermines self-custody and is impossible for non-custodial wallets.

Kentucky's House Bill 380, a 77-page proposal focused on regulating cryptocurrency ATMs and kiosks, has sparked controversy due to a late-stage amendment called Section 33. This section would require hardware wallet manufacturers to provide mechanisms for users to reset credentials, such as passwords, PINs, and seed phrases. Crypto advocates and technical experts argue that this is technologically impossible for non-custodial wallets, as these devices are designed so manufacturers cannot access or recover user private keys. They warn that the mandate would undermine the core security and privacy features of hardware wallets, potentially banning self-custody in Kentucky. The bill, which also addresses licensing, compliance, and consumer protections, has passed the Kentucky House and is now under Senate review. The proposal has raised significant concerns within the cryptocurrency community.