South Korea’s National Tax Service (NTS) is considering appointing a private firm to manage seized cryptocurrency assets after a recent security failure exposed sensitive wallet data and led to unauthorized fund transfers.
Summary
The NTS is exploring the use of an external custodian for confiscated crypto after a leaked wallet recovery phrase resulted in roughly $4.8 million in unauthorized transactions.
Potential custodians will be assessed based on security capabilities, firm size, and insurance compliance under the Virtual Asset User Protection Act.
According to a report by ZDNet Korea, the agency has initiated a review into outsourcing the storage and management of seized digital assets.
This move comes in response to a security incident on Feb. 26, when a wallet recovery phrase was inadvertently revealed in an official press release. The release included images of a Ledger hardware wallet along with a sheet displaying the mnemonic phrase. Shortly after, unauthorized parties transferred crypto assets worth approximately $4.8 million.
In light of the breach, the NTS plans to screen potential custody providers using several criteria, including their security infrastructure, organizational scale, and whether they carry insurance coverage in line with South Korea’s Virtual Asset User Protection Act.
To oversee these efforts, the agency has established a dedicated task force focused on digital asset management. The group is working on enhancing operational guidelines covering the entire lifecycle of seized crypto assets—from confiscation and storage to eventual liquidation. It will also carry out internal reviews and staff training programs.
Additionally, the task force is pushing for the creation of a specialized department to handle cryptocurrency-related responsibilities more efficiently. An NTS official noted that duties are currently spread across multiple divisions but confirmed that steps are being taken to centralize operations.
Series of incidents raises concerns
The NTS case is not an isolated one. In recent months, several similar incidents have emerged across South Korea involving government and law enforcement agencies, where confiscated crypto assets were either lost or compromised.
In response, South Korea’s National Police Agency has rolled out new protocols for managing seized cryptocurrencies. These guidelines require authorities to follow standardized procedures for handling wallet addresses, private keys, and storage systems to prevent further mishaps.
