South Korea's National Tax Service (NTS) plans to hire professional private custodians to store digital assets seized in criminal cases. This decision to move from self-custody to private custody comes after embarrassing past mistakes by the NTS and other state agencies resulted in significant financial and reputational damage.
Why is South Korea changing its crypto storage policy?
The NTS has confirmed it will transition from its self-storage methods to private professional custody services within the first half of this year. For years, South Korean officials successfully seized Bitcoin and other tokens using hardware wallets stored in evidence rooms, but a series of recent embarrassing and costly security breaches have prompted this change.
According to Cryptopolitan, the NTS once accidentally released a press release that included high-definition photos of a hardware wallet. Unfortunately, the photos clearly displayed the 24-word mnemonic seed phrase, which anonymous observers used within minutes to extract approximately $4.8 million (8.1 billion KRW) worth of seized tokens.
Ko Young-il, head of the NTS's advanced virtual asset management system, stated that security requirements, company size, and insurance coverage will be prioritized when selecting partners. The NTS is also collaborating with the Ministry of the Interior and Safety to establish a dedicated Digital Asset General Bureau. This new department will oversee the entire lifecycle of seized assets, from initial acquisition to final sale and liquidation into the national treasury.
Can private custodians truly protect state assets?
Currently, the National Police Agency (NPA) holds approximately 54.5 billion KRW (around $39.5 million) in seized assets, with Bitcoin accounting for over 90% of its value. Despite this, the NPA's three previous tender attempts last year failed due to a budget of only 83 million KRW for the police project.
It has been suggested that the government should adopt a public custody model, involving government-led professional trustees rather than relying entirely on private contractors.