This is a secret phrase that can be used to help blockchain verify your identity in case of a lost wallet identifier or yubikey or other 2nd factor authentification reset request. It in no way grants access to the account funds in any way.
Basically it is used so Blockchain can verify that they are communicating with the actual account owner.
So obviously it needs to be securely hashed, or else anyone who compromises the database (or has authorised access to it) can impersonate the actual account owner.