- South Korea’s Deputy Prime Minister ordered a nationwide audit and overhaul of seized cryptocurrency management after the National Tax Service accidentally disclosed a wallet seed phrase in a press release.
- The security breach allowed an unknown party to briefly drain several million dollars in tokens, following a separate incident where Seoul police lost access to $1.4 million in Bitcoin due to poor third-party custody.
- These failures have accelerated the implementation of institutional-grade custody standards and the development of the Digital Asset Basic Law scheduled for 2026.
After an incident that involved the National Tax Service, which disclosed a wallet seed phrase in a press release highlighting digital assets confiscated from a delinquent taxpayer, South Korea’s Deputy Prime Minister and Finance Minister, Koo Yun-cheol, ordered a nationwide audit and overhaul of how public institutions manage seized cryptocurrency.
The exposed phrase allowed an unknown party to briefly drain a wallet holding tokens worth several million dollars before the funds were recovered.
Koo stated that the government does not hold digital assets for investment or speculative purposes, but only through legal enforcement actions such as tax collection and criminal investigations.
In an earlier case, police in Seoul’s Gangnam district lost access to 22 Bitcoin (BTC), valued at about US$1.4 million (AU$1.8 million) at the time, after allowing a third-party firm to control the seized assets without retaining the private keys. The incident led to an ongoing bribery investigation.
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Complete Overhaul
Following the incidents, Yun-cheol directed an urgent review of all cryptocurrency held by public bodies and called for reforms to custody and security procedures. The measures include stronger key management practices, tighter internal controls, and enhanced monitoring to prevent unauthorised transfers.
The cases have accelerated efforts to introduce institutional-grade custody standards for government-held digital assets. They are also feeding into work on South Korea’s Digital Asset Basic Law, which is expected to be introduced in 2026.
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