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 incident 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 now drafting selection criteria for private custody providers and aims to finalize its choice within the first half of 2026. Candidates will reportedly be evaluated on several factors, including security standards, company size, and whether the firm carries insurance under South Korea’s Virtual Asset User Protection Act. The process signals a broader effort by South Korean authorities to formalize how confiscated digital assets are stored and managed.
The custody selection effort will be led by a newly established task force dedicated to improving the country’s digital asset management systems. The group is working on updated operational manuals that cover the full life cycle of seized assets, spanning seizure, storage, and eventual liquidation. The task force is also expected to carry out institutional assessments and provide personnel training to reduce the risk of future mishandling.
In addition to improving procedures, the task force is preparing to establish a dedicated internal division to oversee all crypto-related work within the NTS. An agency official acknowledged that because cryptocurrency is a relatively new asset class, responsibilities are currently fragmented across multiple departments. Preparations are underway to consolidate these functions into a single centralized unit, according to ZDNet Korea.
The seed phrase leak was not the only custody failure to prompt government action. Seoul’s Gangnam police separately came under scrutiny after allegedly losing 22 BTC that had been seized as part of an investigation. The two incidents together prompted authorities to launch a broader inter-agency review of how the government handles confiscated digital assets.
On March 1, South Korea’s Deputy Prime Minister and Minister of Economy and Finance, Koo Yun-cheol, announced a cross-agency probe into government practices surrounding seized crypto. The review reflects growing pressure on South Korean institutions to establish clearer and more secure frameworks for managing digital assets as their prevalence in criminal cases continues to rise.
Originally reported by CoinTelegraph.
