South Korea’s Korea National Police Agency is reportedly preparing new guidelines for the management and storage of seized digital assets as law enforcement agencies adapt to the growing role of cryptocurrency in criminal investigations.
According to local media reports, the agency has drafted a directive outlining procedures for handling seized crypto assets throughout the investigation process. The proposal aims to standardize how officers secure wallet addresses, private keys, and other digital evidence related to cryptocurrency holdings.
Authorities say the shift reflects a broader transformation in investigative practices. Unlike traditional confiscated assets that can be physically stored, cryptocurrencies require specialized technical management to ensure they remain secure and accessible during legal proceedings.
A police spokesperson said investigators increasingly need structured guidance and technical support to properly handle digital assets. In the past, confiscated items were placed in warehouses or physical evidence storage. Today, law enforcement must also safeguard software wallets and cryptographic keys that control blockchain-based funds.
The draft guidelines also include provisions for managing privacy-focused cryptocurrencies that may require additional tools or expertise for tracking and storage.
Private Custody Provider Under Consideration
As part of the proposed framework, the police agency is also exploring the possibility of appointing an external custody provider to manage seized digital assets.
Reports indicate the agency intends to select a private custody firm within the first half of 2026 to assist with the secure storage of confiscated crypto. Previous attempts to appoint a provider reportedly failed after applicants did not meet technical or security requirements.
Budget limitations have also complicated the process. Authorities reportedly allocated around 83 million Korean won, roughly $55,000, for handling seized digital assets, a figure some observers consider insufficient given the scale and risks involved.
Over the past five years, the total value of cryptocurrency seized by police in cases with finalized rulings has reached approximately 54.5 billion won, or about $36.5 million. The majority of those assets were held in Bitcoin, accounting for more than 50 billion won, with smaller amounts in Ethereum.
The growing value of seized digital assets has increased pressure on authorities to implement reliable custody systems similar to those used by regulated financial institutions.
Custody Failures Prompt Policy Changes
The move to formalize crypto custody procedures follows several incidents that exposed weaknesses in how digital assets were previously handled by authorities.
Earlier this year, officials from the Gwangju District Prosecutors’ Office discovered during an internal inspection that approximately 320 Bitcoin held in government custody had disappeared during an investigation conducted in 2025.
The missing cryptocurrency was later returned by an unknown hacker in an unexpected development. Prosecutors subsequently liquidated the recovered assets and transferred roughly 31.59 billion won, about $21.5 million, to the national treasury.
The incident raised concerns about operational security and oversight in government-managed crypto wallets.
By introducing clearer guidelines and potentially partnering with professional custody providers, authorities hope to reduce the risk of similar incidents in the future while improving the management of digital evidence in criminal cases.