South Korea NTS Seeks Custody Firm After Crypto Breach

TLDR

Table of Contents

South Korea’s National Tax Service began reviewing private custody providers after a security lapse exposed wallet recovery phrases.
Unauthorized entities transferred about $4.8 million in seized crypto assets following the disclosure.
The agency will evaluate candidates based on security systems, company size, and insurance coverage under the Virtual Asset User Protection Act.
A dedicated task force now leads efforts to improve digital asset management and internal controls.
Officials plan to establish a centralized division to oversee all crypto-related responsibilities.

South Korea’s National Tax Service has begun selecting a private custody provider after a security lapse exposed wallet recovery phrases. The breach led to unauthorized transfers worth about $4.8 million from seized crypto holdings. Officials now plan structural reforms and tighter controls to manage digital assets.

South Korea NTS Reviews Private Custody Plan After $4.8 Million Transfer

The National Tax Service confirmed it will review candidates to manage confiscated crypto assets. The review follows a Feb. 26 incident involving exposed wallet recovery phrases. Images in an official press release revealed a Ledger device and a handwritten mnemonic sheet.

As a result, unauthorized entities transferred crypto tokens valued at about $4.8 million. The agency acknowledged the lapse and began internal checks. ZDNet Korea reported that the agency started formal discussions on outsourcing custody services.

The NTS will assess firms based on security systems and operational capacity. It will also examine company size and experience with institutional digital assets. Officials will verify whether candidates hold insurance under the Virtual Asset User Protection Act.

An NTS official said, “We are reviewing options to strengthen custody management.” The official added that departments currently share crypto responsibilities. However, the agency has begun preparing a centralized structure.

The task force will lead evaluations and draft revised guidelines. It will also define standards for asset storage and transfer approvals. Authorities will select a provider after completing compliance checks.

Task Force Plans Centralized Digital Asset Oversight in South Korea

The agency created a dedicated task force focused on digital asset management systems. The group will improve manuals covering seizure, storage, and liquidation processes. It will also conduct internal audits and staff training programs.

Officials stated that recovery phrase exposure triggered immediate reviews of existing procedures. The task force began mapping the full lifecycle of seized assets. It aims to prevent further unauthorized movements.

The group will also examine technical safeguards for cold wallets and storage devices. It plans to establish stricter controls over physical and digital access. Personnel will receive updated guidance on handling sensitive information.

An NTS representative said, “We are preparing to establish a centralized division.” The representative explained that several departments currently manage crypto tasks. The agency intends to consolidate oversight under one unit.

Authorities confirmed that at least two other incidents occurred in recent months. Law enforcement agencies reported separate cases of lost or compromised seized assets. The task force will coordinate with relevant bodies during its review.

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