South Korea Adopts Standardized System for $53 Million in Public-Sector Crypto

South Korea will introduce a standardized system to manage 78 billion won ($53.4 million) of virtual assets held by the public sector. The government also set internal rules covering every stage from acquisition to incident response to prevent thefts at agencies including the National Tax Service and police.

The government approved the plan to improve the holding and management system for virtual assets in the public sector at an emergency economic task force meeting chaired by Deputy Prime Minister and Finance Minister Koo Yun-cheol on Aug. 10. The guidelines will be distributed immediately to ministries, local governments and public institutions and will take effect at once.

As of Aug. 6, the central government held 78 billion won ($53.4 million) in virtual assets seized or confiscated during investigations and tax collection procedures, government data showed. The National Tax Service held the largest amount at 52.1 billion won ($35.7 million), followed by the prosecution service at 23.4 billion won ($16 million), the National Police Agency at 2.2 billion won ($1.5 million) and the Korea Customs Service at 300 million won ($205,000).

The amount collected through compulsory seizure of virtual assets jumped to 63.9 billion won ($43.7 million) last year from 600 million won ($410,000) in 2022, an increase of more than 100-fold. As holdings grew, security lapses also mounted. In August last year, Bitcoin worth about 30 billion won ($20.5 million) was lost in a phishing attack at the Gwangju District Prosecutors' Office. In February, separate thefts at Seoul's Gangnam Police Station and the National Tax Service involved about 2.1 billion won ($1.4 million) of Bitcoin and several million won worth of virtual assets.

The government tightened security rules for the acquisition, storage and response stages. Seized or confiscated assets must be transferred immediately to institutional wallets such as cold wallets disconnected from the internet. Sensitive information, including wallet recovery phrases, must be split among at least two administrators.

Physical security measures will include mandatory safes and CCTV, along with regular reviews of access records. Authorities must immediately freeze accounts for assets held at exchanges. Assets received as donations will be sold immediately to limit risk.

The government will also activate an emergency response system as soon as a leak or theft occurs. Remaining assets must be moved to a new wallet, and major incidents such as hacks must be reported to the National Intelligence Service, the National Police Agency and the Korea Internet & Security Agency, or KISA. Officials found responsible for incidents caused by rule violations will face measures including criminal complaints and disciplinary action.