A proposed amendment to Kentucky’s House Bill 380 has sparked industry backlash by extending regulation beyond bitcoin ATMs to hardware wallet providers.
The measure would require companies like Ledger and Trezor to implement mechanisms allowing users to reset passwords, PINs or seed phrases, alongside offering live customer support.
“The mandate is technologically impossible for non-custodial wallets,”
Said the Bitcoin Policy Institute.
Critics argue the requirement would force manufacturers to introduce backdoors, undermining the core security model of self-custody wallets.
The bill frames the changes as consumer protection, aiming to help users recover lost access to digital assets, but industry experts warn it misunderstands how private key security works.
Failure to comply would classify providers under deceptive practices law, exposing them to civil penalties and enforcement action by the state attorney general.
The legislation has already passed the Kentucky House and now heads to the Senate, where lobbying efforts are expected to intensify.
If enacted, the law could force hardware wallet providers to exit the state, raising concerns about restrictions on self-custody and broader implications for crypto regulation.
At the time of reporting, Bitcoin price was $69,162.88.