Korea Tax Agency Moves to Secure Seized Crypto Assets

South Korea’s National Tax Service is moving to overhaul how it manages seized digital assets, following a recent security incident that exposed vulnerabilities in its internal custody system.

According to officials and industry sources, the agency is reviewing a plan to appoint private custody providers to hold confiscated cryptocurrency as early as the first half of the year

The move comes after a wallet recovery phrase was inadvertently disclosed in a public press release, leading to unauthorized transfers reportedly worth around $4.8 million.

The incident has prompted the agency to shift away from in-house storage toward a model that relies on professional custodians. Authorities believe outsourcing custody could enhance security and reduce the risk of similar breaches in the future.

Under the proposed framework, the National Tax Service will evaluate potential custody providers based on several criteria, including security standards, company size, and the availability of insurance coverage. These requirements will align with provisions under the Virtual Asset User Protection Act, which governs digital asset operations in the country.

The selection process will be overseen by a dedicated task force established earlier this month to strengthen crypto asset management practices

The group is also working on improving operational procedures for the seizure, storage, and liquidation of digital assets, while coordinating with external experts to assess current systems.

It is worth noting that South Korea has been tightening its regulatory approach to digital assets, particularly as the use of cryptocurrencies in tax enforcement cases grows

The shift toward third-party custodians reflects a broader trend among advanced economies that rely on specialized firms for secure asset management.

In parallel, the agency is preparing to establish a dedicated digital asset management division to centralize oversight

Officials say this will help streamline operations and improve coordination across departments currently handling crypto-related matters.

The move highlights the growing importance of secure infrastructure in government handling of digital assets, as authorities adapt to the challenges posed by an evolving crypto landscape.

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