South Korea Unveils Draft Legislation for Seizure of Private Crypto Wallets

Key Points

• South Korean officials draft legislation enabling legal confiscation of private crypto wallets.

• Proposed amendments establish protocols for secure transfer of confiscated digital currencies.

• Joint custody model between courts and investigators designed to prevent asset misappropriation.

• New framework fills regulatory voids in current criminal enforcement statutes.

• Security breaches motivate South Korea’s enhanced cryptocurrency confiscation regulations.

Legislative authorities in South Korea have introduced draft amendments designed to facilitate the confiscation of privately controlled cryptocurrency wallets during criminal proceedings. These proposed modifications to the Criminal Procedure Act respond to limitations in existing legislation that fails to comprehensively address digital currencies managed through private cryptographic keys. The framework establishes formal custody mechanisms that would subject confiscated virtual assets to rigorous legal supervision.

Regulatory shortcomings identified in private wallet seizure cases

The legislative proposal originates from an academic study conducted by four National Tax Service officials in South Korea. This research appeared in the Criminal Policy Research journal’s June issue, published by the Korea Institute of Criminology and Justice. Investigation team leader Jang Hee-won contributed to developing this legislative analysis.

The study concentrates on virtual currencies that holders manage independently using private cryptographic keys rather than relying on centralized trading platforms. Such holdings encompass hardware storage devices and personal wallets maintained outside institutional custody arrangements. The study’s authors contend that conventional confiscation methods prove insufficient for addressing these wallet configurations.

The researchers examined a 2025 Supreme Court ruling concerning Bitcoin maintained on a digital currency platform. This judgment validated that law enforcement properly confiscated Bitcoin stored via exchange-managed wallets during criminal cases. Nevertheless, the ruling failed to establish guidelines for privately controlled wallets since investigators cannot physically seize blockchain-native assets.

Draft legislation outlines warrant requirements and transfer protocols

The proposed framework from South Korea advocates establishing specific statutory provisions governing private digital asset confiscations. According to the research paper, judicial warrants must explicitly specify asset classification, quantities involved, authenticated wallet addresses, receiving addresses, transfer mechanisms, and retention procedures. Under these guidelines, law enforcement would implement uniform protocols when executing virtual currency seizures.

The authors further contend that Article 120 of the Criminal Procedure Act inadequately addresses cryptocurrency transactions. Current statutes primarily govern physical searches, property access rights, and associated enforcement actions. Moving cryptocurrencies between wallet addresses necessitates distinct procedural protections and statutory provisions.

The draft legislation also confronts vulnerabilities associated with private key possession during criminal inquiries. Suspects may retain duplicate private keys even after authorities secure one copy. Accordingly, the research recommends transferring confiscated virtual currencies into controlled storage addresses rather than depending solely on access credentials.

Joint custody framework proposed for confiscated virtual currencies

Officials in South Korea have suggested implementing a collaborative custody arrangement involving judicial and investigative bodies. The researchers maintain that concentrating control over seized digital assets within a single entity creates unacceptable security vulnerabilities. Alternatively, collaboratively managed storage solutions would diminish theft potential while enhancing accountability during legal processes.

The proposal incorporates provisional custody provisions for time-sensitive scenarios involving imminent asset movements. Judicial authorities could approve immediate transfers of digital holdings into designated interim wallets pending final custody determinations. Law enforcement agencies could subsequently complete transfers into jointly supervised wallets after satisfying statutory prerequisites.

This legislative initiative follows previous measures aimed at bolstering digital asset security within government institutions. Earlier in the current year, the National Tax Service evaluated private custody service providers following a security breach that compromised wallet recovery credentials. Consequently, unauthorized individuals transferred approximately $4.8 million in cryptocurrency holdings, triggering comprehensive reassessments of confiscation, storage, and liquidation procedures throughout South Korea.

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