South Korean authorities are seeking a clear legal framework to seize crypto assets stored in private wallets. Four National Tax Service officials - including investigation team leader Jang Hee-won - published a proposed amendment to the Criminal Procedure Act in the June 2026 issue of the Criminal Policy Research journal. The proposal focuses on establishing an official framework to seize assets from self-custody systems where private keys are held directly by users.
The move aims to close a legal loophole following a 2025 South Korean Supreme Court ruling. While the court affirmed that Bitcoin could be seized from exchange-hosted wallets, the judicial system had yet to formulate execution procedures for assets secured in self-custodial wallets.
Why the Old Rules Fall Short
The core issue lies in an outdated legal foundation. Article 120 of the Criminal Procedure Act was never designed for blockchain-based assets. The challenge stems from the nature of digital tokens: wallet owners can easily store copies of private keys across multiple mediums.
This creates major hurdles for field investigators. Even if a physical wallet is seized from a suspect’s residence, the individual retains the ability to transfer all funds before law enforcement can move them to an official government repository.
To close this loophole, the new proposal requires search warrants to include specific parameters. Police must specify the targeted asset types and amounts, verified wallet addresses, government destination addresses, transfer methods, and detailed storage procedures.
Preventing Insider Theft
Security risks do not originate solely from suspects. Rather than granting custody to a single agency, the researchers proposed a co-managed wallet structure. In practice, this would involve both court officials and investigative authorities to eliminate opportunities for internal manipulation.
The recommendation to distribute access comes in the wake of a recent high-profile embarrassment. In February 2026, the National Tax Service committed a major blunder by issuing a press release that accidentally contained the recovery phrase for a seized wallet. The mistake proved costly: an external party spotted the credentials and drained $4.8 million worth of crypto.
The leak prompted the formation of a dedicated task force to overhaul protocols for seizing, storing, and liquidating crypto assets. These efforts align with South Korea’s broader macroeconomic agenda, as the government works to finalize a won-backed stablecoin roadmap and reform foreign exchange policies.
This legal framework would provide clear standard operating procedures. If this shared judicial vault system is implemented, the state will regain a powerful mechanism to seize criminal assets - this time without the risk of theft from within its own ranks. Reported by crypto.news.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
