Former Coinbase CTO Balaji Srinivasan predicts that the US government will confiscate private keys from millions of crypto wallets via iPhones and Android devices, claiming that the companies possess remote access to private key shards via firmware ‘backdoors’ and cloud storage.
Srinivasan gained credibility for his early warnings about COVID-19. Admittedly, he lost some of that credibility after losing his bet that bitcoin would hit $1 million and this latest prediction is even more difficult to believe: an extralegal confiscation of private property “to remit stolen funds to a cash-hungry federal government.”
The would-be Nostradamus calls these tech giants a “systemic risk” to the crypto industry.
Balaji prediction comes amid fears of Ledger Recovery
His prediction piggybacks on heightened fears of Ledger’s remote access to private key shards. The hardware manufacturing giant released a firmware upgrade for all hardware wallets (except the Nano S) that will install code for its new, fully remote, asset recovery service. For the first time, Ledger devices will contain code enabling Ledger and two other companies to remotely access funds via multisig-type 2-of-3 private key Shamir shards. Unbelievably, the company claims its service is “risk-free.”
Balaji predicts the US government could require Apple and Google to create more backdoors for government access to crypto assets. One vector might be root-level access, while another may be more akin to Executive Order 6102 when the US government banned private ownership of gold.
Indeed, Balaji did not seem to think governments needed to accuse someone of a crime prior to seizing their assets. In the US, law enforcement can use a controversial practice called civil forfeiture to seize assets it suspects have been used to commit a crime, even if the present owner of the assets isn’t accused of a crime.
Fears of another Executive Order 6102
Moreover, people in other countries do not necessarily have US constitutional rights. Many governments seize assets extralegally.
According to Balaji, tech companies are unlikely to block a government seizure on behalf of their customers. Indeed, he mentioned the sanctions that most of Europe and the US imposed on Russia in 2022 which initially enjoyed widespread support. Even companies like McDonald’s, Coca-Cola, and Starbucks voluntarily withdrew from Russia.
An action by Apple CEO Tim Cook might be an exception since Apple declined to surveil iCloud for child sexual abuse content. That plan would have helped law enforcement catch child abusers but would also have allowed it to monitor other files on iCloud.
Is there a way to remedy this?
Balaji mentioned that switching operating systems to Linux might be a solution but it needs to scale. Other possible solutions include avoiding devices that use iOS or Android and storing digital assets on air-gapped devices that don’t connect to the Internet. Hardware wallets that don’t have cloud backups or any type of recovery service are another solution. Critics say any corporation holding shards or any other type of private key reconstruction data can conspire to seize funds.
In summary, Balaji continues to gain media attention for increasingly unlikely predictions. He seems undeterred after losing his $1 million bitcoin bet. Now, he predicts that the US government will one day force Apple and Google to use backdoors to seize digital assets from Americans. He says these tech giants are a systemic risk to digital assets via their mobile devices, firmware updates, and cloud storage services.