South Korea’s National Tax Service (NTS) is moving to outsource the custody of seized cryptocurrency assets following a significant security failure earlier this year. On February 26, the agency inadvertently published a crypto wallet seed phrase in an official press release, which included an unredacted image of a Ledger cold wallet alongside a sheet of paper displaying the mnemonic phrase. The exposure resulted in the unauthorized transfer of confiscated tokens worth approximately $4.8 million.
According to ZDNet Korea, which cited people familiar with the matter, the NTS is currently drafting selection criteria for potential custody providers. The agency is aiming to finalize its choice within the first half of 2026. Candidates will reportedly be evaluated on factors such as security standards, company size, and whether they carry insurance under South Korea’s Virtual Asset User Protection Act.
The custody selection process will be overseen by a newly formed task force dedicated to improving the government’s digital asset management systems. The group is working on several initiatives, including updating operational manuals that cover the full life cycle of seized assets — from initial seizure through storage and eventual liquidation. The task force will also conduct institutional assessments and provide personnel training.
In addition, the task force is preparing to establish a dedicated internal division to centralize oversight of crypto-related work. An NTS official acknowledged that because cryptocurrency is a relatively new asset class, responsibilities are currently spread across multiple departments. Efforts are underway to consolidate these functions into a single unit, according to ZDNet Korea.
The February incident was not the only custody failure to draw scrutiny. Police in Seoul’s Gangnam district allegedly lost 22 BTC that had been seized, prompting a broader inter-agency review of how confiscated digital assets are handled across government bodies. The two incidents together highlighted systemic weaknesses in the storage and management of seized crypto in South Korea.
In response, Koo Yun-cheol, South Korea’s Deputy Prime Minister and Minister of Economy and Finance, announced on March 1 a cross-agency investigation into government procedures for managing seized digital assets. The probe signals that authorities are treating the issue as a matter requiring coordinated reform rather than isolated fixes. The NTS’s push to engage a professional custody provider reflects a broader effort to bring formal standards to an area that has so far lacked consistent oversight.
Originally reported by CoinTelegraph.
