South Korea's National Tax Service (NTS) is accelerating revisions to its digital asset custody strategy, pivoting towards private cryptocurrency custody services. This move aims to enhance the security management of seized digital assets and address recent security breach incidents.
Revising Custody Strategy and Strengthening Security
The NTS has established a new oversight team tasked with centrally evaluating and regulating external custody service providers. The team's objective is to create unified operational procedures for the storage, auditing, and eventual liquidation of seized digital assets. This transformation plan is expected to be completed by the first half of 2026. When selecting custody partners, the NTS will prioritize service providers offering adequate insurance coverage, possessing robust cybersecurity standards, and demonstrating a reliable operational history.
Evaluation Criteria and Regulatory Framework
The NTS is developing a comprehensive screening process to select potential custodians. This process will focus on advanced cybersecurity protocols, multi-party authorization mechanisms, and secure offline storage solutions. Candidate institutions must also meet the legal standards stipulated by South Korea's 'Act on the Reporting and Use of Virtual Asset User Protection,' including requirements for risk coverage, compliance, and operational reserves.
Additionally, other key evaluation criteria include the scale and financial health of the custody companies, as well as their existing experience in managing large crypto asset portfolios for government or institutional clients. Audit transparency and crisis management capabilities are expected to be significant benchmarks. The newly formed oversight team will be assembled by NTS leadership to guide this transition and simultaneously advance employee training and inter-departmental protocol standardization.
Legal Reforms and Industry Context
This adjustment in custody strategy follows a series of recent digital asset security incidents, including previous instances of digital asset loss by some municipal departments, most notably a case involving 22 Bitcoin. These successive failures prompted joint investigations by government agencies to identify potential risks and strengthen asset handling procedures. The NTS's move to enhance regulation occurs within a regulatory environment increasingly demanding specialized and refined custody solutions.
South Korea's 'Act on the Reporting and Use of Virtual Asset User Protection' mandates that licensed custody institutions maintain sufficient insurance, clear compliance measures, and financial reserves, standards that have now become the norm for public sector digital asset management. The national-level initiative aligns with international trends where governments increasingly rely on professional custodians to mitigate the growing risks associated with managing blockchain assets.
NTS leadership anticipates that partnering with insured private custody service providers will significantly reduce the risk of future asset loss or procedural failures. This shift marks a move towards a more mature and resilient approach in managing state-held virtual assets in South Korea, redefining how the public sector manages cryptocurrency enforcement through stricter regulation and technological improvements.