Shielding Seized Assets: South Korea’s Police Overhaul Crypto Custody Standards

The South Korean National Police Agency (KNPA) has introduced a new set of guidelines to improve how seized digital assets are managed, with these rules taking effect from March 16, 2026. This move comes after several notable custody mishaps, including the 2023 theft of 320 BTC in Gwangju and multiple phishing attacks that highlighted serious weaknesses in how the agency handled storage. Currently, the police control cryptocurrencies worth over 54.5 billion KRW, mostly Bitcoin and Ethereum, and the Ministry of Finance sees this framework as a key step toward rebuilding public confidence and safeguarding digital assets held by the state.

At the heart of these guidelines is a clear standardization in wallet management that adapts depending on the type of asset and its security requirements. Privacy-focused coins like Monero must now be kept in specialized software wallets hosted on dedicated servers where private keys are securely sealed—hardware wallets were found unsuitable for these coins. For more common cryptocurrencies such as BTC and ETH, the rules limit officials to using only official blockchain explorers for verification and strictly forbid keeping private keys online. The agency also requires a strict separation of PINs, mnemonics, and physical keys, ensuring multiple layers of security through segregation.

These steps are part of a broader global movement toward more advanced crypto regulation, reflecting the methods used by companies such as Strategy and BitMines. By moving away from informal or makeshift storage methods, South Korea aims to reduce the risks of human error that have previously caused losses. Looking further ahead into the first half of 2026, the KNPA intends to bring in a professional third-party custody service for managing substantial crypto holdings, aiming to protect the state’s multi-billion won portfolio with security measures typical of large institutions as crypto adoption keeps gaining momentum.