South Korea prepares law for seizing crypto assets held in self-custody wallets

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• South Korean officials have proposed legislative changes that would allow investigators to more effectively seize cryptocurrency held in self-custody wallets during criminal investigations.
• The proposal calls for confiscated digital assets to be stored in wallets jointly managed by the courts and law enforcement, along with new warrant requirements tailored to digital assets.

Officials from South Korea’s National Tax Service have proposed amendments to the country’s legal framework to simplify the seizure of cryptocurrency held in self-custody wallets. The proposal was published in the June issue of Criminal Policy Research, a journal of the Korea Institute of Criminology and Justice.

According to the authors, current laws work well for cryptocurrency held on exchanges but are largely ineffective when it comes to self-custody wallets, where users retain full control over their private keys.

The discussion follows a 2025 South Korean Supreme Court ruling that upheld the seizure of Bitcoin held in an exchange account. However, the decision did not address how authorities should handle crypto stored in personal wallets.

The authors argue that simply obtaining a suspect’s private key is not enough. The owner may still possess a backup copy and move the assets before the investigation is completed. They also note that South Korea’s Criminal Procedure Act was written with physical property in mind and does not account for the unique characteristics of blockchain-based assets.

Proposal Calls for Court-Supervised Crypto Custody

To close this legal gap, the researchers recommend creating a dedicated legal framework for handling self-custodied digital assets.

Under the proposal, search and seizure warrants would be required to specify the type and amount of cryptocurrency involved, the wallet address, the destination address for the transfer, the transfer method, and the custody procedures.

The paper also recommends storing confiscated crypto in wallets jointly controlled by the courts and investigative authorities rather than placing the assets under the sole control of a single agency. According to the authors, this approach would reduce the risk of theft or misuse. If an immediate transfer to a jointly managed wallet is not feasible, the assets could be temporarily moved to a court-designated address.

The proposal comes just months after a security incident at South Korea’s National Tax Service. In February, the agency accidentally published the seed phrase for an official crypto wallet, allowing unknown actors to steal approximately $4.8 million in digital assets. The incident prompted authorities to review their procedures for storing, seizing, and disposing of confiscated cryptocurrency, including the possible use of professional custody providers.