South Korea police draft crypto seizure rules after custody lapses: Report

South Korea’s National Police Agency (KNPA) has reportedly drafted new guidelines for handling seized cryptocurrencies, including privacy-focused assets, as authorities move to standardize how digital asset evidence is stored and managed.

According to a report by local media outlet Asiae, the KNPA completed a draft directive outlining compliance requirements at each stage of crypto seizure. The directive includes measures for managing software wallets needed to handle crypto assets and privacy-focused tokens.

A police spokesperson told Asiae that as investigative paradigms change, field investigators need systematic guidelines along with appropriate support. “In the past, seized assets were stored in warehouses. Now we must manage wallet addresses and private keys,” the spokesperson said.

The move follows recent cases in which seized cryptocurrencies were lost or mishandled while in government custody, prompting closer scrutiny of asset management practices.

Cointelegraph reached out to the Korea National Police Agency and the Supreme Prosecutors’ Office for comments, but had not received a response by publication.

KNPA to select custody provider to handle seized crypto

According to Asiae, the KNPA also plans to finalize the selection of a private custody provider within the first half of 2026. In 2025, three separate bidding attempts to find a custody provider reportedly failed after firms that applied were deemed unsuitable.

Asiae also reported that budget constraints posed a challenge. The report said the police allocated only 83 million won (about $55,600) to handle seized crypto assets, despite the risks involved.

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Based on cases with finalized court rulings, Asiae estimated that the value of crypto seized by police in the last five years totals 54.5 billion won (about $36.5 million).

This includes approximately 50.7 billion won in Bitcoin ($BTC) and 1.8 billion won in Ether (ETH).

Phishing incident highlights crypto custody risks

The new draft guidelines for managing seized cryptocurrencies follow heightened scrutiny of custody practices after a phishing incident involving government-held Bitcoin earlier this year.

On Jan. 23, officials with the Gwangju District Prosecutors’ Office discovered during a routine inspection that about 320 Bitcoin had gone missing from prosecutors’ custody during an investigation in August 2025.

On Feb. 19, prosecutors reported that they had unexpectedly recovered the missing $BTC after the unknown hacker returned the stolen crypto.

On March 10, the prosecutors said that they had sold the assets and transferred about 31.59 billion Korean won (about $21.5 million) to the national treasury.

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