South Korea’s National Tax Service (NTS) is moving to appoint a private custodian for seized crypto assets following a major security lapse that exposed a wallet recovery phrase and led to the unauthorized transfer of funds.
On Feb. 26, the agency mistakenly revealed a crypto wallet seed phrase in an official press release, which included an unblurred image of a Ledger hardware wallet alongside a sheet displaying the mnemonic phrase. The incident resulted in the transfer of approximately $4.8 million worth of confiscated tokens.
According to ZDNet Korea, the NTS is now considering outsourcing custody of seized digital assets and is in the process of drafting criteria for selecting a provider. A decision is expected in the first half of 2026, with candidates evaluated based on security standards, company scale, and insurance coverage under South Korea’s Virtual Asset User Protection Act.
The move reflects a broader effort by authorities to formalize how confiscated crypto is handled after a series of operational failures exposed weaknesses in storage and management practices.
Task force to oversee custody overhaul
A newly established task force will lead the selection process and work on improving digital asset management systems. Its responsibilities include updating operational procedures covering the full lifecycle of seized assets—from confiscation to storage and liquidation—as well as conducting staff training and system evaluations.
The group is also preparing to set up a dedicated division to centralize crypto-related responsibilities, which are currently spread across multiple departments.
Broader probe into asset handling
The seed phrase leak, along with a separate incident in which Seoul’s Gangnam police reportedly lost 22 BTC in seized assets, has prompted a wider review. On March 1, Deputy Prime Minister and Finance Minister Koo Yun-cheol announced a cross-agency investigation into how the government manages confiscated digital assets.
