South Korea’s National Tax Service (NTS) is gearing up to select a private custody provider for its seized cryptocurrency assets, following a series of security lapses that have raised significant concerns.
The move comes in the wake of a February 26 press release that inadvertently exposed a crypto wallet seed phrase, leading to the unauthorized transfer of about $4.8 million worth of crypto tokens. The press release included an image of a Ledger cold wallet and a sheet of paper showing the mnemonic phrase without any blurring, a critical oversight that highlighted the agency’s vulnerabilities in handling digital assets.
NTS Plans to Outsource Crypto Custody
Citing sources familiar with the matter, ZDNet Korea reported that the NTS is now reviewing a plan to outsource the custody of confiscated crypto and is in the process of drafting selection criteria for potential providers. The agency aims to select a provider within the first half of 2026, emphasizing the urgency of securing these assets more effectively.
Evaluation Criteria for Custody Providers
The NTS plans to evaluate candidates based on several key factors, including stringent security requirements, the company’s size, and whether the firm holds insurance under South Korea’s Virtual Asset User Protection Act. This comprehensive approach underscores the agency’s commitment to mitigating the risks associated with crypto custody.
New Task Force to Oversee Custody Provider Selection
The custody selection process will be led by a newly-formed task force focused on advancing digital asset management systems. This task force is working on multiple initiatives, including the development of improved operational manuals that cover the entire lifecycle of seized assets, from seizure to storage and liquidation. The group will also conduct assessments and provide personnel training to ensure a robust and secure management framework.
Inter-Agency Review of Seized Crypto Assets
The NTS’s wallet leak and a separate custody failure, in which Seoul’s Gangnam police allegedly lost 22 Bitcoin (BTC) seized in an investigation, prompted authorities to initiate an inter-agency review of how the government handles seized 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 to address these issues.
Forward-Looking Insights
The NTS’s decision to outsource crypto custody reflects a broader trend of South Korean authorities formalizing their approach to digital asset management. As cryptocurrencies continue to gain traction, the need for secure and efficient handling of these assets becomes increasingly critical. The establishment of a dedicated task force and the planned selection of a private custody provider are significant steps toward achieving this goal, setting a precedent for other jurisdictions grappling with similar challenges.
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