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South Korea’s National Tax Service (NTS) is moving to hand off seized virtual assets to private custody providers after a recent security lapse exposed the risks of doing it in-house.
Korea Tax Authority Fast-Tracks Crypto Custody Selection
The agency is reportedly working to select a qualified custody firm within the first half of the year, part of a broader effort to tighten control over digital asset seizures and prevent a repeat of last month’s theft incident, according to a report by Zdnet Korea citing unnamed sources.
The shift follows a Feb. 26 case in which mnemonic codes tied to seized assets were inadvertently exposed during a public disclosure tied to tax delinquency enforcement. That slip led to two separate thefts, forcing the agency to confront a simple reality: managing crypto is not the same as holding cash in a vault.
Officials are now reviewing a plan to entrust seized holdings to private custodians, while building out detailed selection criteria that will determine who gets the job. The goal is straightforward—secure the assets, reduce operational risk, and avoid becoming a headline for the wrong reasons again.
Among the criteria under consideration are security standards, company scale, and insurance coverage aligned with South Korea’s Virtual Asset User Protection Act. In other words, not just any firm with a wallet and a pitch deck will qualify. Alongside this, the NTS is not the only South Korean agency in need of a custodian.
As far as this news is concerned, an industry source familiar with the discussions said the process is expected to be selective, noting that “not every custody provider can be entrusted with this,” particularly given the sensitivity of government-seized assets and the reputational stakes involved.
The National Tax Service plans to begin the selection process once those criteria are finalized, with urgency driving the timeline. Zdnet Korea reports that officials are aiming to complete both the decision to use custody services and the selection of a provider within the first half of the year.
To manage the transition, the agency has established a dedicated unit—the Virtual Asset Management System Advancement Task Force—launched March 11 to oversee the overhaul. The group is tasked with designing a system that treats digital assets less like an afterthought and more like a core enforcement responsibility.
Ko Young-il, who leads the task force, said the approach mirrors practices already adopted in developed markets, signaling that South Korea is aligning with international standards rather than improvising its own playbook.
Beyond selecting a custodian, the task force is working through a list of structural upgrades. These include revising operational manuals that govern the full lifecycle of seized assets—from confiscation to storage to eventual liquidation—along with conducting external audits to assess current systems.
The agency is also expanding professional training, a move that acknowledges a basic truth: crypto custody is technical, unforgiving, and not something you want staff learning on the fly during a live enforcement action.
In parallel, officials are preparing to launch a dedicated Digital Asset General Division, which would centralize oversight of crypto-related matters that are currently spread across multiple departments. Details on its structure and timeline will be finalized in consultation with the Ministry of the Interior and Safety.
An NTS official said the fragmentation reflects how new the asset class still is within government operations, adding that an integrated system is now seen as necessary to manage the growing role of digital assets in tax enforcement.
The broader message is clear. As crypto holdings become more common in enforcement cases, the infrastructure around them has to mature just as quickly. If last month’s incident proved anything, it’s that even a small operational slip can turn into a costly lesson—one the agency appears determined not to repeat.