Police Seized 54.5 Billion Won in Virtual Assets Over Five Years! South Korean Police Plan to Establish Privacy Coin Seizure Guidelines to Fill Regulatory Gaps

South Korea’s Police Agency is planning to establish new guidelines for the seizure of virtual assets, initially including privacy coins and software wallets management, and is also designing a private custody mechanism in response to the recent incident involving the leakage of 320 BTC.

The Korea National Police Agency (KNPA) is in the process of drafting new management guidelines for virtual asset seizures, which will for the first time incorporate procedures for handling “privacy coins.” According to reports from South Korean media outlet Asia Economy, the police have completed the draft framework of relevant instructions and officially included management plans 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’s efforts to strengthen digital asset management systems following recent breaches in asset custody.

Why establish new regulations? Privacy coins differ from regular cryptocurrencies

As reported by Asia Economy, historically, the police primarily stored seized virtual assets 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 and the creation of wallets within the program, their private keys are usually stored as files or strings rather than managed solely through physical devices. Therefore, the custody model differs from mainstream assets like Bitcoin. The report states that this situation previously forced frontline personnel to operate software wallets without clear regulations, operating in a near “non-compliance” state, which increased practical confusion and risks.

The report also points out that privacy coins, due to their ability to conceal transaction parties and amounts, have long been viewed as more susceptible to use 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 is one of the key reasons why the police are now separately including privacy coins in the new guidelines.

Seizures amount to 54.5 billion KRW over the past five years

According to data, if calculated at the market price on the 17th, the total value of virtual assets seized and legally confirmed by South Korean police over the past five years is approximately 5.45 trillion KRW, with about 50.7 billion KRW in Bitcoin and around 1.8 billion KRW in Ethereum. This estimate is based solely on cases that have completed judicial procedures; the actual seized amount could be higher if including cases where suspects refuse to surrender wallet passwords. Additionally, due to the high volatility of crypto prices, valuation can vary significantly depending on the timing of the assessment.

When interviewed, Korean police admitted that their operational model has changed. In the past, physical evidence was mostly stored in warehouses, but now they must manage wallet addresses and private keys. This indicates that virtual assets are not only a new form of criminal proceeds but are also forcing law enforcement to rebuild a complete process from seizure and sealing to custody.

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

In addition to updating guidelines, the Korean police also plan to complete the selection of private custody (custody) service providers by the first half of 2026. In 2025, the police conducted three tenders seeking external custodians capable of handling seized virtual assets, but all failed due to reasons such as small applicant companies, insufficient stability, and low budgets. The report notes that the current allocated budget is only 83 million KRW (about $56,000 USD), which is clearly insufficient given the risks that providers must bear.

South Korean media also quoted experts who warned that decentralized management of wallets and seed phrases across different police agencies could lead to more vulnerabilities. Experts suggest that the government should consider establishing a more centralized and professional “public custody” mechanism, entrusting high-risk digital assets to specialized institutions to reduce internal control errors and security incidents.

Asset loss incidents accelerate regulatory gaps

The acceleration of establishing seizure guidelines is also related to recent government vulnerabilities in Bitcoin custody. On January 23, Gwangju District Prosecutors’ 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 unidentified 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 risks compared to traditional physical evidence. The new regulations proposed by the Korean police are not only technical enhancements but also part of establishing a more suitable governance framework for law enforcement as the scale of seizures continues to grow in the digital asset era.

The proposed new seizure guidelines, especially the formal inclusion of privacy coins and software wallets, indicate a shift from traditional physical evidence management to digital asset security governance. If private custody agencies are successfully selected, Korea’s law enforcement may further develop a more centralized and institutionalized crypto asset custody system. For the market, this is not only an adjustment in Korea’s law enforcement procedures but also a sign that governments worldwide are increasingly recognizing that “how to securely store” digital assets has become as important as “how to seize” them in the context of crypto-related crimes.

• This article is reprinted with permission from: BlockCast
• Original title: “South Korean Police to Draft Privacy Coin Seizure Guidelines, Valued at 54.5 Billion KRW in Virtual Assets Seized Over Five Years”
• Original author: An Fei