South Korea Codifies Procedures for Seizing and Selling Crypto Assets

South Korea has detailed the procedures for seizing and converting into cash crypto assets such as Bitcoin held by debtors. The rules distinguish between crypto assets held at exchanges and those managed directly through personal wallets and other means. They also allow hard-to-sell altcoins to be exchanged for other crypto assets before a sale.

The Supreme Court said on November 9 that revised civil enforcement rules covering compulsory execution against crypto assets took effect on November 1. The court said the changes clearly set out the procedures courts, enforcement officers and virtual asset service providers must follow from seizure through liquidation, reflecting the way crypto assets are held and traded.

Civil enforcement cases involving crypto assets have been rising rapidly. The number of filings naming 28 registered domestic virtual asset service providers as third-party obligors increased from 423 in 2023 to 958 in 2024 and 3,136 in 2025. In 2026, 3,186 cases were filed in the January-September period alone, exceeding the total for all of last year. A third-party obligor is a third party that owes an obligation to the debtor in connection with the claim subject to enforcement.

Compulsory execution against crypto assets was already possible under the previous framework. But because there were no detailed rules, courts in practice had followed procedures used for execution against other property rights. Crypto assets have no physical form and no public disclosure mechanism comparable to real estate registration, creating a need for procedures tailored to their characteristics.

Under the revised rules, crypto assets held through an exchange are subject to seizure in the form of a claim for transfer of virtual assets. That is the user's right to require an exchange to send a specified type and amount of crypto assets to a designated address. Once a seizure order is issued, the exchange may no longer transfer the assets to the debtor. The debtor is also barred from disposing of the transfer claim or receiving the assets.

The revised rules provide several ways to turn seized crypto into cash. A sale can be entrusted to an exchange or carried out after the assets are moved to an enforcement officer's account. A sale through another exchange is also permitted. Altcoins and other crypto assets that are difficult to liquidate can first be exchanged for other crypto assets that are easier to sell. The court will determine the method of sale after considering trading conditions and the views of the parties. Sale proceeds will go through distribution procedures before being used to repay creditors.

When a debtor directly manages crypto assets through a personal wallet or similar means, the crypto assets themselves become the object of seizure. In that case, the court must prohibit disposal and at the same time order that the assets be transferred to an enforcement officer. That is because anyone holding the private key or other necessary information can move the assets at any time, making a disposal ban alone insufficient to ensure effective enforcement. The assets can then be transferred to an address designated by the creditor or sold through an exchange under a court order.

A court administration official said the revision is expected to improve predictability in crypto enforcement procedures. The judiciary will continue to develop related systems and practices to better protect property rights and strengthen the effectiveness of enforcement, the official added.

Lee Seung-woo, Hankyung.com reporter leeswoo@hankyung.com