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If torturing and kidnap are on the table, how does this help? They can torture you to give them the keys just like a password.

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He can’t give the attackers the customer keys or any other data. But yes as another poster says downtown the attackers may not actually understand that.

You might want to study asymetric cryptography.

No, you'd better hope that the kidnappers have studied cryptography. If they think they can extract something, they'll go ahead anyway.

Why don't they bother traditional bank managers then?

One time long ago someone did try to get money by forcing a bank owner to open a vault, and it didn't work, and since then everyone knows it's fruitless.

It just needs to actually be fruitless. It sounds like for crypto custodians, it's not fruitless and they know that.

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