South Korea’s National Tax Service (NTS) is seeking a private crypto custody provider after a security lapse in which officials accidentally exposed a wallet seed phrase leading to the loss of millions in seized digital assets.
The breach occurred in late February 2026 when the agency published a press release containing an image of a hardware wallet alongside an unredacted recovery phrase, effectively giving public access to the funds. Unknown actors quickly used the information to transfer roughly $4.8 million worth of tokens out of the wallet, according to local reports.
In response, the NTS is now reviewing plans to outsource custody of confiscated cryptocurrencies to a private provider with selection criteria expected to include
security standards,
company size, and
insurance coverage under South Korea’s virtual asset regulations.
The incident has also triggered a broader government review around custody of seized digital assets following concerns over repeated custody failures across public agencies.
Authorities are reportedly aiming to establish clearer procedures and potentially create a dedicated unit to oversee crypto-related operations as they move to strengthen safeguards around digital asset management.
The dedicted vision will reportedly work on operational manuals covering the full cycle of seized assets from:
seizure,
storage, and
liquidation.
Ko Young-il, Head of the National Tax Service’s Task Force for Advanced Virtual Asset Management System, stated regarding this:
“This is a method mainly used in developed countries.
We plan to implement it in the first half of the year as soon as a decision is made after gathering expert opinions.”
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