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 related instructions and have officially incorporated a management plan for “software wallets” into the regulations. This will serve as an important basis for the 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, 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-standardized” manner, which increased practical confusion and risks.

The report also notes that privacy coins, which can conceal transaction parties and amounts, have long been viewed as more susceptible to use in crimes 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.

Seizure scale reaches 54.5 billion KRW in the past five years

According to reports, based on the market price as of the 17th, South 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 is based only on 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 of assessment.

When interviewed, Korean police admitted that their approach to handling cases has changed. In the past, physical evidence was mostly stored in warehouses; now, they must manage wallet addresses and private keys. This means virtual assets are not only a new form of criminal proceeds but are also forcing 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 revising guidelines, the KNPA plans to select private custody service providers by the first half of 2026. In 2025, the police conducted 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. The report states that the current allocated budget 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 decentralized management of wallets and seed phrases across various police agencies could lead to more 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 control errors and security incidents.

Asset loss incidents accelerate regulatory reforms

South Korea’s push to accelerate the establishment of seizure guidelines is also related to recent government custody vulnerabilities. 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 prosecutors 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 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 governance framework better suited to the digital asset era, especially as seizure volumes continue to grow.