South Korea’s National Tax Service is moving to outsource custody of seized crypto assets after a security lapse exposed mnemonic codes and led to theft.
The agency plans to select a private custody provider within the first half of the year to improve security and reduce operational risk.
The shift follows a February 26 incident where exposed wallet recovery phrases tied to seized assets resulted in two separate theft cases.
Officials are now developing strict selection criteria, including security standards, company scale and insurance coverage aligned with the Virtual Asset User Protection Act.
An industry source said the process will be highly selective, noting that not all custody providers meet the requirements for handling sensitive government-held assets.
The National Tax Service has also launched a Virtual Asset Management System Advancement Task Force to oversee system upgrades and custody integration.
The overhaul includes revising asset management procedures, conducting audits and expanding staff training to address the technical complexity of crypto custody.
Authorities are also preparing to establish a dedicated Digital Asset General Division to centralise oversight as crypto becomes more common in enforcement cases.