South Korea tax agency seeks private crypto custodian after security lapses

South Korea’s tax agency is seeking a private custodian for seized crypto after a wallet seed phrase leak exposed government-held assets.

South Korea’s National Tax Service (NTS) is moving to select a private custody provider for seized crypto assets after a February press release exposed a wallet recovery phrase and triggered the unauthorized transfer of confiscated tokens.

On Feb. 26, the NTS accidentally exposed a crypto wallet seed phrase in an official press release, resulting in the unauthorized transfer of crypto tokens valued at about $4.8 million. The release included an image of a Ledger cold wallet and a sheet of paper showing the mnemonic phrase without being blurred. 

Citing people familiar with the matter, ZDNet Korea reported that the agency is reviewing a plan to outsource custody of confiscated crypto and is drafting selection criteria for providers. The NTS is reportedly aiming to select a provider within the first half of 2026. 

The agency plans to evaluate candidates based on several factors, including security requirements, company size, and whether the firm holds insurance under South Korea’s Virtual Asset User Protection Act, ZDNet Korea reported. 

The move shows South Korean authorities are trying to formalize custody of seized crypto after a series of handling failures exposed weaknesses in how confiscated digital assets are stored and managed.

The custody selection will reportedly be led by a newly-formed task force focused on advancing digital asset management systems. 

The task force is reportedly working on several initiatives, including improving operational manuals covering the full life cycle of seized assets, from seizure to storage and liquidation. It would also conduct assessments and personnel training. 

Related: South Korea opposition party pushes to scrap planned 22% crypto tax

The group is also preparing to establish a dedicated division to oversee crypto-related work.

An NTS official said that since crypto is relatively new, responsibilities are split across departments. However, preparations are underway to create a centralized unit, ZDNet Korea reported. 

The NTS’s wallet leak and a separate custody failure in which Seoul’s Gangnam police allegedly lost 22 BTC seized prompted authorities to conduct an inter-agency review of seized crypto assets. 

On March 1, South Korea’s Deputy Prime Minister and Minister of Economy and Finance, Koo Yun-cheol, announced a cross-agency probe on how the government handles seized digital assets. 

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Source: CoinTelegraph