You're right but to be perfectly clear, they can spend within the set limits, using the phone part with the cloud part. That is a recovery scenario that is well defined and part of the trade-off.
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I believe there is also a like 6 month wait period option, to unlock the whole balance, if spending within daily limits is too restrictive. These are just company policies, you can spend the entire balance, theoretically, with the phone part plus the Block server-side part.