South Korea’s National Tax Service is seeking to select a private custody provider to handle seized crypto assets after a security lapse resulted in private keys being exposed and assets being transferred by unauthorized entities.
Summary
- South Korea’s National Tax Service is reviewing a plan to appoint a private custodian for seized crypto assets after a wallet recovery phrase leak led to $4.8 million in unauthorized transfers.
- The agency will evaluate custody providers based on security standards, company size, and insurance coverage under the Virtual Asset User Protection Act.
The National Tax Service has begun reviewing a plan to outsource custody of confiscated crypto assets, according to a report from ZDNet Korea.
The latest action follows a security mishap on Feb. 26, when a wallet recovery phrase was exposed in an official press release. Images of a Ledger cold wallet and a sheet of paper showing the mnemonic phrase were published. Subsequently, unauthorized transfers of crypto tokens worth about $4.8 million took place.
As such, the agency will now evaluate candidates based on several factors, including security requirements, company size, and whether the firm holds insurance under South Korea’s Virtual Asset User Protection Act, the report said.
A newly formed task force focused on digital asset management systems will lead the process. The task force is already working on several initiatives, including improving operational manuals covering the full lifecycle of seized assets, from seizure to storage and liquidation. It will also conduct internal assessments and personnel training.
Meanwhile, the task force will also work toward establishing a dedicated division to oversee crypto-related work.
An NTS official cited in the report said responsibilities are split across departments, but added that preparations are underway to create a centralized unit.
The NTS incident is one of the many that have surfaced across South Korea over the past months. At least two other similar incidents were recorded involving law enforcement and other agencies, where seized crypto assets were lost or compromised.
As previously reported by crypto.news, South Korea’s National Police Agency has introduced new guidelines for handling seized cryptocurrencies. Law enforcement agencies would now have to follow standardized procedures when handling wallet addresses, private keys, and storage systems.
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