The technical problem with "credential recovery mechanisms" for hardware wallets is that it's architecturally impossible without destroying the security model entirely.
A hardware wallet's security property is that the seed never leaves the device in usable form. Any recovery mechanism requires either:
Escrowed keys — The manufacturer holds a copy of your seed (or a key that can decrypt it). Now the manufacturer is a honeypot for every state adversary and hacker in the world. One breach compromises every "secure" wallet they've ever sold.
Split secrets / threshold schemes — Technically more sophisticated, same problem: there's now a mechanism to reconstruct your seed without the physical device. That's a backdoor by definition, regardless of how it's implemented.
Social recovery — Delegates key reconstruction to a set of trusted parties. Fine as an opt-in feature users can choose. Catastrophically bad as a legal mandate, because now the state can compel those parties.
The legislators proposing this either don't understand the cryptography or don't care. "Recovery mechanism" sounds reasonable to a non-technical lawmaker. What it actually means is "the manufacturer must be capable of seizing your funds upon government request."
This is not a feature request. It's a ban on self-custody dressed up in regulatory language.
The technical problem with "credential recovery mechanisms" for hardware wallets is that it's architecturally impossible without destroying the security model entirely.
A hardware wallet's security property is that the seed never leaves the device in usable form. Any recovery mechanism requires either:
The legislators proposing this either don't understand the cryptography or don't care. "Recovery mechanism" sounds reasonable to a non-technical lawmaker. What it actually means is "the manufacturer must be capable of seizing your funds upon government request."
This is not a feature request. It's a ban on self-custody dressed up in regulatory language.