Ledger

Ledger’s CEO says that, while it may take a few years, big money is getting into crypto.

Over the past 12 months, some investors learned the hard way why they needed to move their crypto offline. Those who kept Bitcoin (BTC) and altcoins on crypto exchanges like FTX lost control of their assets, sometimes forever. Events drew a red line under the storied crypto adage: “Not your keys, not your coins.” 

FTX’s loss was hardware wallet manufacturer Ledger’s gain, however. The Bahamas-based exchange’s November 2022 bankruptcy filing delivered to Ledger “our biggest sales day ever,” the firm’s chief experience officer, Ian Rogers, told Cointelegraph, and “November turned out to be our biggest sales month on record.”

Paris-based Ledger has been on a strong growth curve recently, though the past year has not been without controversy. In May, for instance, the firm drew industry ire when it launched a new secret recovery phrase storage service called Ledger Recover. Still, it remains one of the best-known and most-used crypto wallet makers in the world.

Cointelegraph recently caught up with Rogers and Ledger CEO Pascal Gauthier in New York City to discuss the new crypto climate in the United States, the latest trends in crypto storage and differences in doing business in the U.S. and Europe, among other topics.

Cointelegraph: Many think that the crypto/blockchain sector is still in the doldrums or moving sideways at best, but you see reasons to be cheerful even here in the U.S.?

Pascal Gauthier: What happened in 2023 — and went virtually unnoticed — is a change of tone regarding Bitcoin. When the SEC [Securities and Exchange Commission] implied that Bitcoin was a utility and/or commodity — and not a security [like other altcoins] — this triggered two things: large companies like BlackRock began their ETF [exchange-traded fund] application process, and then the media narrative around Bitcoin changed almost overnight.

As 2023 began, Bitcoin was for drug dealers, terrorists, bad for the planet, etc. — and suddenly it became completely kosher. The biggest financial institutions in the U.S. are suddenly doing Bitcoin.

CT: The BlackRock application for a spot-market Bitcoin ETF was a turning point?

PG: Big money is coming into crypto; it’s been announced. It may take a few years to really finally arrive, but if you look at Fidelity, BlackRock, Vanguard…

CT: What about U.S. regulations? Aren’t they still a barrier?

PG: The next administration will decide the fate of crypto in the United States. If Biden stays in power, this administration could continue to be aggressive toward crypto. If it’s someone else, we’ll see what happens.

CT: Let’s talk about offline storage devices. Mark Cuban said in 2022 that crypto wallets were “awful.” Did he have a point?

PG: A lot of our early customers used our [cold wallet] product to “buy and hold.” You would purchase a Ledger [device], you put your Bitcoin in it, and then you put it someplace and forget about it. But that’s not what we recommend now.

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Today, you can connect your wallet to Web3 and use your private keys to do many things, including buying, selling, swapping and staking crypto, as well as engaging with DApps [decentralized applications] and even declaring your taxes.

CT: On a 1 to 10 scale, where would you put cold wallets today in terms of user experience (UX)?

PG: For the industry, it’s a three. For Ledger, maybe a four — and we’re striving to be a 10. The industry has a lot to do in terms of UX and UI [user interface].

Ian Rogers: Your hardware-software combo today is not just about hardware and software. It’s an end-to-end experience.

When you’re buying an Apple iPhone, for instance, you’re not buying a piece of hardware; you’re buying into the Apple experience. We would ultimately like that to be the same thing with Ledger. Our approach is to do the absolute best user experience possible without compromising on security or self-custody.

CT: Still, there’s these UX issues like the 24 seed words you need to recover your private key if you lose your Ledger device. Some users go to great lengths to safeguard those words, even engraving them in steel just in case their house burns down. Doesn’t that sound sort of extreme?

PG: It is a little backwards to have something like a metal plate in your home. It’s not very 21st century. But we came up with a solution for this.

When you use a Ledger product, you end up with your Ledger device and a PIN code. And you will also have those 24 words that become your master password, basically. You need to keep those 24 words safe, and this is a major barrier to entry for a lot of people. They don’t trust themselves with those 24 words. They don’t trust themselves not to lose them.

So, we came up with a service called Ledger Recover [i.e., an optional paid subscription service provided by Coincover that is expected to launch in October] to deal with that. It allows you to shard your private key into three encrypted shards and then send them to three different custodians. They cannot do anything with the [single] encrypted shard. Only you can bring your 24 words together again if necessary.

CT: Don’t we already have something like that with “social recovery,” where you entrust your cold wallet recovery to several friends or “guardians?”

PG: Social recovery doesn’t really work. We’ve done something that resembles social recovery — but with businesses [i.e., Ledger, Coincover and EscrowTech]. You will have to present your ID if you want to initiate the shard recovery.

CT: You were criticized when you first announced the Ledger Recover service in May. Then, the launch was postponed amid the “backlash.” There were security concerns. People said these three shard-holding companies could reconstruct your private key.

PG: There is still a lot of education to be done for people to understand really how security works. People said [at that time] that it might be a good product if it were more transparent and easier to adopt. So we didn’t go live in May, as planned, in order to make the product ‘open source,’ which adds something in terms of transparency though not security,

CT: But couldn’t three sub-custodial companies, at least in theory, collaborate and reconstruct your privacy key?

PG: It’s not possible. They don’t have the necessary tools necessary to decrypt and reconstruct.

CT: Moving on to Ledger’s business model, do you sometimes worry that as big institutions like Fidelity Investments or banks like BNY Mellon enter the crypto space that users may simply park their crypto with them? If they get hacked, those giant custodial institutions will then make them whole again. Or at least that is sometimes the thinking.

PG: We’re a pure technology company. So when Fidelity decides to become a [retail] crypto custodian, they’ll probably come to us and buy a part of our technology to build their own technology stack. 

CT: Your business strides several continents. You’re based in France, but you sell many of your devices in the United States. You have first-hand experience of those two business climates — the U.S. and Europe. Are there key differences when it comes to crypto?

PG: Europe has a tendency to over-regulate or regulate too fast, generally speaking. Sometimes people say, well, you know, Europe has clarity because it has MiCA [Markets in Crypto-Assets, the EU’s new crypto legislation], while in the U.S., there is a lack of clarity and lots of lawsuits.

But in the U.S., the way that the law is designed is slow and bumpy. It takes time to change laws in the U.S., but when change finally does come, it’s often for the better.

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CT: Are you linking heavy regulation with a lack of innovation?

PG: It’s hard to say if they are directly linked, but Europe has always had a heavy hand in terms of taxation and regulation.

Ian Rogers: To me, there’s no question they are linked. At LVMH [the French luxury goods conglomerate where Rogers served as chief digital officer for five years], we worked with a lot of startups. Every European startup wanted to get to the U.S. or China to “get scale” before they came back to Europe. Europe is not a good market if you’re a startup.

CT: But Ledger remains positive about the future of cryptocurrencies and blockchain technology overall?

PG: Things are not necessarily what they seem to be. It was our [late] French president François Mitterrand, who said: “Give time for time.” There’s something going on now, and only the future will be able to make clear what is happening.