It looks like the hardware is not needed at all 🙈 If you lose your hardware, you can use your phone, together with the key on Bitkey’s server, to set up new hardware (after a Delay and Notify period expires, during which Bitkey pushes alerts to your app to alert you of a recovery attempt).

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Yeah, that's what I was trying to say with "coordinate with Bitkey to transfer funds (via the mobile app key and the Bitkey servers key) to an entirely new 2-of-3 keyset"
To confiscate the gov needs access to your phone, unlock code of phone and a warrant for Bitkey. Or somehow trick you in using the hardware with your finger print.