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 and seizure of 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 in hardware wallets (cold wallets). However, this method is often inadequate for privacy coins. Since some privacy coins require installation of specialized software on computers or servers to create wallets, their private keys are usually stored as files or strings rather than managed solely through physical devices. This difference in custody methods from mainstream assets like Bitcoin has caused confusion and risks among frontline personnel, who previously had to operate software wallets without clear regulations, increasing operational chaos and security concerns.

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

Seizure scale reaches 54.5 billion KRW in the past five years

According to reports, based on the market prices as of the 17th, South Korean police have seized virtual assets worth approximately 54.5 billion KRW over the past five years, with cases that have gone through judicial proceedings. Of these, about 50.7 billion KRW is Bitcoin, and around 1.8 billion KRW is Ethereum. This estimate only accounts for cases with completed legal processes; 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 often locked in storage; now, they must manage wallet addresses and private keys. This shift indicates that virtual assets are not only new sources of criminal proceeds but are also forcing law enforcement to rebuild comprehensive procedures for seizure, sealing, and custody.

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

In addition to updating the 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 firms capable of handling seized virtual assets, but all failed due to reasons such as small applicant companies, insufficient stability, and low budgets. The current budget allocated is only 8.3 million KRW (about $56,000 USD), which is insufficient considering the risks involved for providers.

Experts quoted by South 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 accelerate the need for systemic reforms

South Korea’s push to accelerate seizure guidelines is also driven by recent security breaches in government custody of Bitcoin. On January 23, Gwangju District Prosecutors’ Office discovered that about 320 BTC from a seizure in August 2025 had gone missing during routine checks. Subsequently, on February 19, prosecutors announced 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 highlights 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 police are not only technical improvements but also part of establishing a governance framework better suited to the expanding scale of digital asset seizures in the digital age.