[Alpha Biz= Kim Minyoung] South Korean public institutions are accelerating efforts to outsource custody of seized virtual assets to private firms following a string of security incidents involving stolen cryptocurrencies.

According to industry sources on March 27, the Korean National Police Agency has increased the budget for its “virtual asset custody outsourcing project” from KRW 83 million to KRW 267 million after repeated failed bidding attempts. The agency initially issued a tender in November last year but plans to relaunch the process with a higher budget to attract specialized firms, aiming to select a provider within the first half of the year.

The National Tax Service is also preparing guidelines to entrust seized crypto assets to private custodians and is expected to begin selecting operators within the same timeframe.

The shift comes amid a series of high-profile mishandling and theft cases that have exposed weaknesses in how public institutions manage digital assets.

In one notable case, the Gwangju District Prosecutors’ Office lost 320 bitcoins—valued at approximately KRW 31.5 billion—after accessing a phishing site in August last year. The breach went undetected for six months before being discovered in January. The stolen assets were later recovered after the hacker returned them.

Separately, a police station in Seoul’s Gangnam district only recently discovered that 22 bitcoins seized in November 2021 had been leaked externally. Authorities had stored the assets in a hardware wallet (cold wallet) without transferring them to a secure police-controlled wallet. Because hardware wallets can be accessed remotely using mnemonic recovery phrases, individuals who knew the recovery keys were able to withdraw the funds.

In another incident, the National Tax Service inadvertently exposed a wallet’s 24-word mnemonic recovery phrase in a press release image while announcing the seizure of assets from a high-value delinquent taxpayer, leading to theft.

These incidents have underscored systemic vulnerabilities in public-sector crypto asset management and are driving demand for professional custody solutions.

Globally, public institutions have already adopted private custodians. The United States Marshals Service, for example, entrusts seized digital assets to Coinbase Prime, following a competitive bidding process completed in 2024. In the UK, the National Police Chiefs' Council has been using Komainu since 2021.

Industry observers note that as the size of the crypto market continues to expand and more illicit proceeds or delinquent assets are seized in digital form, the need for secure, professional custody solutions is becoming increasingly urgent.

 

 

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