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- South Korea is standardizing crypto seizure and custody procedures.
- A major Bitcoin mishandling incident exposed security gaps.
- Authorities plan to appoint a professional crypto custody provider.
South Korea is stepping up efforts to standardize how law enforcement handles seized digital assets, following a series of mishandling incidents that exposed gaps in crypto custody practices. The Korean National Police Agency (KNPA) has drafted new guidelines aimed at improving how cryptocurrencies — including privacy-focused tokens — are stored, tracked, and secured during investigations.
The move reflects a broader shift in policing as digital assets become a more common part of financial crime cases.
New Guidelines Target Wallet Security and Asset Management
According to local reports, the KNPA’s draft directive outlines detailed procedures for each stage of crypto seizure. Unlike traditional assets stored physically, cryptocurrencies require secure management of wallet addresses and private keys — a challenge many agencies are still adapting to.
A police spokesperson noted that investigative methods are evolving rapidly. Officers now need clear systems to handle digital evidence, including software wallets and encrypted keys. The guidelines are expected to provide a standardized framework to reduce human error and improve accountability.
The focus also extends to privacy coins, which can be harder to trace and secure, adding complexity to evidence handling.
Custody Provider Search Faces Delays
Alongside the new rules, authorities plan to appoint a private custody provider to safeguard seized crypto assets. However, progress has been slow. Attempts in 2025 to select a suitable provider failed after applicants did not meet requirements.
Budget constraints have also raised concerns. Reports indicate that only about $55,600 has been allocated for managing seized cryptocurrencies — a relatively small amount given the risks involved.
Over the past five years, seized crypto assets in South Korea have reached an estimated $36.5 million, with Bitcoin accounting for the majority, followed by Ethereum.
Phishing Incident Exposed Critical Weaknesses
The urgency behind these reforms intensified after a high-profile security breach earlier this year. Authorities discovered that 320 Bitcoin had gone missing from government custody during an investigation.
In a surprising twist, the stolen funds were later returned by the unidentified hacker. Officials eventually liquidated the recovered assets and transferred over $21 million to the national treasury.
The incident underscored the vulnerabilities in existing systems and highlighted the need for stricter protocols and professional custody solutions.
Also Read: South Korea’s Toss Plans Stablecoin Launch as Fintech Giants Race for Crypto Payments
South Korea’s push to formalize crypto seizure guidelines marks a critical step in adapting law enforcement to the digital age. As cryptocurrencies play a growing role in criminal investigations, ensuring secure storage and proper handling is no longer optional.
If implemented effectively, the new framework could set a benchmark for other countries grappling with similar challenges — balancing technological complexity with the need for accountability and security.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m your translator between the financial Old World and the new frontier of crypto. After a career demystifying economics and markets, I enjoy elucidating crypto – from investment risks to earth-shaking potential. Let’s explore!
