South Korean Police Plan to Establish Guidelines for Seizing Privacy Coins; Virtual Assets Confiscated Over Past Five Years Valued at 545 Billion Won

The Korea National Police Agency (KNPA) is currently developing new guidelines for the management of seized virtual assets, which will include for the first time the handling of “privacy coins.” According to South Korean media outlet Asia Economy, the police have completed a draft framework for these regulations and have officially incorporated a management plan for “software wallets” as a key basis for future seizure and custody of highly anonymous encrypted assets. This move also reflects the Korean law enforcement agencies’ efforts to strengthen digital asset management systems following recent incidents exposing vulnerabilities in asset seizure and custody.

Why are new regulations needed? Privacy coins differ from regular cryptocurrencies

Asia Economy reports that historically, police have stored seized virtual assets primarily using hardware wallets (cold wallets). However, this method is often inadequate for privacy coins. Since some privacy coins require specialized software installed on computers or servers to create wallets, with private keys stored as files or strings rather than solely on physical devices, their custody differs from mainstream assets like Bitcoin. This has led to confusion and risks, as frontline officers previously had to operate software wallets without clear regulations, often in nearly “unregulated” conditions.

The report also notes that privacy coins, which can conceal transaction parties and amounts, have long been viewed as more susceptible to misuse in crimes and money laundering. Past cases in Korea, such as the “N Room” sexual crimes and North Korea-related crypto money laundering activities, have raised concerns about such anonymous assets. This is one of the key reasons why the police are now separately including privacy coins in the new guidelines.

Seizure scale reaches 54.5 billion KRW in the past five years

According to reports, based on the market value as of the 17th, Korean police have seized virtual assets worth approximately 54.5 billion KRW over the past five years, with cases already legally finalized. Of these, about 50.7 billion KRW is Bitcoin, and around 1.8 billion KRW is Ethereum. This estimate only accounts for cases that have completed judicial procedures; if suspects refuse to disclose wallet passwords, the actual seized amount could be higher. Additionally, due to the high volatility of crypto prices, valuations can vary significantly depending on the timing.

When interviewed, Korean police admitted that their operational approach has changed. In the past, physical evidence was usually stored in warehouses; now, they must manage wallet addresses and private keys. This indicates that virtual assets are not only new sources of criminal proceeds but are also prompting law enforcement to rebuild comprehensive procedures from seizure and sealing to custody.

Police plan to select private custody providers in the first half of 2026

In addition to updating guidelines, the KNPA plans to select private custody service providers by the first half of 2026. In 2025, the police issued three tenders seeking external custodians for seized virtual assets, but all failed due to reasons such as small applicant companies, insufficient stability, and low budgets. Reports indicate that the current budget allocated is only 83 million KRW (about $56,000 USD), which is insufficient considering the risks involved.

Experts quoted by Korean media suggest that decentralizing wallet and seed phrase management across various police agencies could increase control vulnerabilities. They advocate for establishing a more centralized, professional “public custody” system, where high-risk digital assets are managed by specialized institutions to reduce internal errors and security incidents.

Asset loss incidents highlight the need for systemic improvements

Korea’s accelerated efforts to establish seizure guidelines are also related to recent government custody breaches. On January 23, this year, the Gwangju District Prosecutor’s Office discovered that about 320 BTC from a seizure in August 2025 had gone missing during routine checks. The prosecution later announced on February 19 that the stolen Bitcoin had been returned by unknown hackers. By March 10, they stated that the assets had been sold, and approximately 31.59 billion KRW was remitted to the national treasury.

This incident underscores that government agencies face not only price volatility risks but also higher cybersecurity and internal control challenges compared to traditional physical evidence. The new regulations proposed by the Korean police are not only technical enhancements but also part of establishing a governance framework better suited to the expanding scale of digital asset seizures in the digital age.