Ledger, a wallet company, has acknowledged that it and other parties involved in Ledger Recover could be compelled to hand over user wallet seeds to any government entity.
Pascal Gauthier, CEO of Ledger, suggested on May 22 that wallet keys stored through Ledger Recover could be disclosed if faced with government sanctions.
The concern arose within the crypto community regarding the possibility of shard holders revealing user seeds or gaining direct control over user wallets through this feature, as part of Ledger’s new Recover program where user wallet seeds can be “shared” and stored by three different parties.
Gauthier addressed this concern during an episode of the What Bitcoin Did podcast, stating:
“The only concern really is if we get subpoenaed by a government [that says they] would like [us] to retrieve the three shards.”
Gauthier mentioned that governments typically issue subpoenas in rare cases related to terrorism, drugs, and other criminal activities. He argued that average individuals are not frequently subpoenaed and also claimed that collusion between shard holders is highly unlikely in 99% of cases.
However, others on the podcast pointed out that governments could potentially issue subpoenas for tax purposes, citing previous instances where the Internal Revenue Service (IRS) subpoenaed Coinbase to obtain customer data. The IRS has also subpoenaed other cryptocurrency firms, including Kraken and Circle, for user information.
Gauthier distinguished Ledger from Coinbase by highlighting that Coinbase provides banking services, which Ledger does not. He emphasized that Ledger does not possess any information that would be of interest to the IRS.
The podcast participants also discussed Ledger’s use of extended public keys (x-pubs), which display user activity. Although this could be relevant to tax agencies, it is a separate feature from Ledger’s new seed recovery functionality.
Gauthier reiterated that Ledger Recover is optional, and users who are uncomfortable with the feature can utilize Ledger’s alternative storage methods.