South Korea tightens rules for storing seized cryptocurrencies
South Korea’s National Police Agency (KNPA) has introduced new guidelines for managing confiscated crypto assets following a series of incidents involving lost funds. The framework sets standardized procedures for all stages of handling digital assets — from seizure to storage and accounting.
The new requirements include clear protocols for managing wallets, private keys and software tools, as well as specific provisions for handling privacy tokens, which are more difficult to integrate into traditional custody systems. The developments were reported by local outlet Asiae.
A key element of the reform is the plan to select a private custody provider in the first half of 2026 to manage seized crypto assets. Previous attempts to find such a partner in 2025 failed, as applicants were deemed unsuitable.
Authorities also face budget constraints. Police allocated just 83 million won (around $55,600) for managing seized assets despite the associated risks. Over the past five years, law enforcement has confiscated cryptocurrencies worth approximately 54.5 billion won ($36.5 million), including bitcoin and ether.
Reasons behind the changes
The stricter approach follows several high-profile incidents. In one case, authorities lost access to seized BTC after relying on a third-party custodian without controlling the private keys. In another case, prosecutors discovered that around 320 BTC had gone missing, though the funds were later unexpectedly returned by a hacker. The assets were subsequently sold and transferred to the state budget.There have also been phishing incidents that exposed government-controlled wallets to unauthorized access.
Move toward stricter crypto regulation
The new rules are part of South Korea’s broader push to strengthen crypto regulation. The country already has one of the most stringent regulatory frameworks, including: mandatory licensing for crypto exchanges, strict AML/KYC requirements, oversight of digital asset custody and reportingRegulators are now moving toward the next stage — standardizing how government agencies handle crypto assets, including technical aspects of storage and security. In addition, South Korea’s tax authority is preparing to use artificial intelligence to analyze crypto transactions as part of efforts to introduce taxation on digital asset profits.
Experts say the new measures could reduce the risk of losses and improve the efficiency of investigations, but they also highlight the complexity of securely managing crypto assets even for state institutions. South Korea is effectively shaping a model where cryptocurrency is treated as a fully integrated financial asset within the legal system, subject to strict controls and security standards.
Earlier it was reported that Crypto.com is expanding crypto payments in South Korea.
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