In a recent interview, Pascal Gauthier, the CEO of Ledger, unveiled that the private seed phrases of users who opt into Ledger’s new Recover upgrade could potentially be provided to government entities if subpoenaed.
This admission comes amid a wave of controversy surrounding Ledger’s latest firmware update and hardware wallets in general. Many users believe that the new upgrade will put the privacy of crypto users at stake.
The Recover upgrade, touted as an optional firmware update, enables users to back up their seed phrases with third-party entities, including Coincover, Ledger, and an independent backup service provider.
The seed phrase is divided into three encrypted fragments or “shards,” each stored separately by the three parties involved.
Gauthier clarified that the disclosure of seed phrases would be limited to cases involving serious criminal acts, such as drug-related offenses and terrorism.
He argued that the average person is not subjected to subpoenas daily, countering host Peter McCormack’s reference to Coinbase being forced to hand over user data to the United States Internal Revenue Service in 2018.
Gauthier emphasized that Ledger, unlike Coinbase, is not a banking institution and operates under different legal constraints. Despite concerns raised by users and critics regarding privacy breaches, Ledger representatives maintain that the worries are largely exaggerated.
The company further clarified that the original seed phrase remains stored exclusively on the device itself. The Recover upgrade creates an SSS encrypted and sharded backup, which is only decryptable when restored on a Ledger device using multiple parts of the backup.
Regarding the open-sourcing of firmware code, Ledger acknowledged the growing interest in transparency but cited legal constraints imposed by the chip manufacturer, preventing them from making the complete inner workings of their “secure element” chip open source. Nevertheless, they expressed their commitment to gradually increase the open-source nature of their code.
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While Ledger’s new Recover upgrade has sparked concerns among some users, the company emphasizes that individuals retain the freedom to choose whether or not to utilize the service.
