South Korean tax officials want clearer laws for seizing crypto held in personal wallets, arguing current rules don’t fit assets controlled by private keys.
In a paper published in the June issue of the Korea Institute of Criminology and Justice’s Criminal Policy Research journal, four officials from the National Tax Service (NTS) — including investigation team leader Jang Hee-won — called for amendments to the Criminal Procedure Act to create a legal framework specifically for self-custodied digital assets. The proposed changes come amid growing friction between how traditional seizure law works and how blockchain-based assets are controlled.
Why self-custody is different
The paper distinguishes between assets held on exchanges or with third-party custodians and those controlled directly by individuals via private keys and hardware wallets. While a 2025 South Korean Supreme Court ruling upheld the lawful seizure of Bitcoin held on an exchange, the authors say that decision doesn’t explain how authorities should handle assets stored in self-custodied wallets.
Self-custody complicates seizure in two key ways:
- There’s no “physical” property to seize. Copying a private key or seed phrase is trivial, so confiscating one copy doesn’t guarantee a suspect can’t move funds from another copy.
- Existing seizure rules (notably Article 120 of the Criminal Procedure Act) were written for physical property and lack procedures for blockchain-specific issues such as wallet addresses, transfer methods and custody of digital keys.
What the NTS officials propose
To plug these gaps, the paper recommends dedicated rules for seizing self-custodied assets and more precise warrant requirements. Key proposals include:
- Warrants should specify the digital asset type and quantity, verified wallet addresses, destination addresses, transfer methods and storage procedures when private keys are controlled by the suspect.
- Use jointly managed wallets overseen by both the courts and investigative authorities—rather than a single agency wallet—to reduce theft and misuse risks.
- Allow temporary transfer to a court-designated address if immediate placement into a jointly managed wallet is impractical and there is a risk the suspect will move the funds.
- Legislation should clearly define conditions for wallet transfers, custody arrangements and management procedures so seized crypto remains under shared oversight rather than sole control of investigators.
Context: a costly security lapse
The proposal follows an embarrassing security incident in February when the NTS accidentally published a wallet recovery phrase in an official press release. Unauthorized parties later moved about $4.8 million in crypto, prompting the agency to form a task force to improve seizure, storage and liquidation procedures and to evaluate hiring a private crypto custody provider.
Why it matters
As self-custody grows, law enforcement and courts worldwide face practical and legal hurdles in handling digital assets without clear procedural guardrails. South Korea’s proposed framework would be among the more detailed attempts to translate seizure law into the language of blockchain — balancing investigators’ needs with technical realities of private-key control.
Read more AI-generated news on: undefined/news
