SEOUL — South Korea’s National Police Agency (KNPA) has drafted new operational guidelines for handling seized cryptocurrencies, including privacy-focused tokens, following several high-profile incidents where digital assets were lost or mishandled while in government custody.
New Directive Aims to Standardize Evidence Handling
According to a report by local media outlet Asiae, the KNPA completed a draft directive that outlines compliance requirements for each stage of cryptocurrency seizure. The directive includes specific measures for managing the software wallets required to handle various crypto assets.
A police spokesperson told Asiae that investigative methods must evolve with technology. “In the past, seized assets were stored in warehouses. Now we must manage wallet addresses and private keys,” the spokesperson said. The spokesperson emphasized that field investigators need systematic guidelines and appropriate technical support as investigative paradigms change.
The move comes after recent cases highlighted vulnerabilities in how authorities manage digital evidence. Cointelegraph contacted the Korea National Police Agency and the Supreme Prosecutors’ Office for comment but had not received a response by publication time.
Phishing Incident Spurs Action
The draft guidelines follow heightened scrutiny of custody practices after a major 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 approximately 320 Bitcoin had gone missing from prosecutors’ custody.
The assets had been seized during an investigation in August 2025. On Feb. 19, prosecutors reported an unexpected development: the unknown hacker returned the stolen cryptocurrency. By March 10, authorities had sold the recovered assets and transferred about 31.59 billion Korean won (approximately $21.5 million) to the national treasury.
This incident underscored the technical challenges and security risks law enforcement faces when seizing digital assets, particularly compared to traditional physical evidence.
Search for a Custody Provider
Alongside the new guidelines, the KNPA plans to select a private custody provider to handle seized cryptocurrencies. Asiae reported that the national police aim to finalize this selection within the first half of 2026.
Previous attempts to secure a provider have faced difficulties. In 2025, three separate bidding attempts reportedly failed after applying firms were deemed unsuitable. Budget constraints have also posed a significant challenge. The police allocated only 83 million won (about $55,600) to manage seized crypto assets, a figure considered low given the value and risks involved.
Based on cases with finalized court rulings, Asiae estimated the total value of cryptocurrency seized by police over the last five years at 54.5 billion won (approximately $36.5 million). This total includes roughly 50.7 billion won in Bitcoin and 1.8 billion won in Ether.
Broader Regulatory Context
South Korea has been actively refining its regulatory approach to digital assets. The push for clearer seizure protocols occurs within a broader framework of increasing oversight. For instance, the country’s financial authorities recently fined the cryptocurrency exchange Bithumb 30 billion won and ordered a six-month partial business suspension for regulatory violations.
Industry analysts note that as cryptocurrency adoption grows, so does its use in both legitimate and illicit activities. This trend makes standardized, secure evidence handling protocols essential for effective law enforcement. The lack of such protocols can jeopardize investigations and asset recovery efforts.
The new KNPA directive represents a formal step toward creating those protocols. It addresses the technical reality that digital assets require fundamentally different custody solutions than cash, vehicles, or real estate.
What Comes Next
The immediate next step for South Korean authorities is the formal adoption of the drafted guidelines and the successful selection of a qualified custody provider. The effectiveness of these measures will be tested in future investigations and asset seizures.
Legal experts suggest that other jurisdictions are likely watching South Korea’s approach. As digital assets become more common globally, establishing robust, transparent procedures for their seizure and management will be a critical task for law enforcement agencies worldwide. The success or failure of South Korea’s new system could inform similar regulatory efforts in other countries.
Updated insights and analysis added for better clarity.
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