Cryptocurrencies' soaring popularity in the past two years has worried politicians. Many countries have started completely banning crypto trading, mining, and owning or imposing partial restrictions on cryptocurrency trade. So far, China has completely banned cryptocurrencies, and Russia has issued permissions for mining cryptos only. If you reside in one of those countries where digital money is considered illegal, the question is whether there is a possibility for the government to find out about your crypto belongings, or your hardware wallet might have robbed you of sleep at night.
Tracing Hardware Wallets
It is true that blockchains are transparent, meaning all transactions, including the transferred amount and public keys, could be browsed by anybody online, but blockchains are also anonymous in the sense that no single public key would be used twice on a blockchain. The pseudonymity provided by blockchains makes it almost impossible to trace users' transactions and find out about their real-world identities.
The single-use public keys are not the only consideration in blockchains taken to provide anonymous transactions for users; there is no KYC in blockchains, meaning anybody with any identity could easily exchange coins, or tokens, without the need for an identity check. Those measures are enough to provide privacy for cryptocurrency traders, but what if KYC was necessary? There are several services making it necessary for users to provide KYC information; those include exchanges and cryptocurrency accessory manufacturers.
But how would governments access that information? The US government has recently passed a bill called the Bipartisan Infrastructure Package (BIF), intending to transform the country's infrastructure. Although the bill is in no way related to cryptocurrencies, or blockchains, it has, for some odd reason, included measures that will restrict the use of cryptocurrencies.
Hardware Wallet Manufacturers under Pressure
Although it is not yet known how the bill would eventually affect hardware wallet manufacturers and users, the pressure on manufacturers to share customer information with the government is expected to go up. That sounds scary, but remember that Prokey and some other hardware wallet manufacturers delete customer data unless customers themselves decide to continue receiving emails and updates.