South Korea Proposes New Law to Seize Self-Custody Crypto Wallets

TLDR

• South Korea proposes new rules to seize self-custody crypto wallets legally.

• Draft law sets procedures for transferring seized digital assets securely.

• Court-managed custody aims to reduce theft and misuse of seized crypto assets.

• Proposal addresses legal gaps left by existing criminal seizure provisions.

• Security concerns drive South Korea’s push for stronger crypto seizure laws.

South Korea has proposed new legal changes to support the seizure of self-custody crypto wallets during criminal investigations. The proposal seeks to amend the Criminal Procedure Act because current rules do not fully address digital assets controlled through private keys. The plan outlines new custody procedures that would place seized digital assets under structured legal oversight.

South Korea identifies legal gaps for self-custody crypto seizures

South Korea’s proposal follows a research paper prepared by four officials from the National Tax Service. The paper appeared in the June edition of the Criminal Policy Research journal published by the Korea Institute of Criminology and Justice. Investigation team leader Jang Hee-won participated in preparing the legislative review.

The paper focuses on digital assets that owners control directly through private keys instead of centralized exchanges. These assets include hardware wallets and other personal wallets that remain outside third-party custody. The authors argued that existing seizure procedures cannot adequately address these wallet structures.

The researchers reviewed a 2025 Supreme Court decision involving Bitcoin held on a digital asset exchange. The ruling confirmed that investigators lawfully seized Bitcoin stored through an exchange wallet during criminal proceedings. However, the decision did not establish procedures for self-custody wallets because investigators cannot physically possess blockchain-based assets.

South Korea proposes new warrant and custody procedures

South Korea’s proposal recommends creating dedicated legal provisions covering the seizure of self-custody digital assets. The paper stated that warrants should clearly identify the asset type, quantity, verified wallet address, destination address, transfer method, and storage process. Consequently, investigators would follow standardized procedures when executing digital asset seizures.

The researchers also argued that Article 120 of the Criminal Procedure Act does not fit   transactions. Existing law mainly covers physical searches, property access, and related enforcement measures.Transferring cryptocurrencies between wallet addresses requires different procedural safeguards and legal requirements.

The proposal also addresses risks linked to private key ownership during criminal investigations. A suspect may still control duplicate private keys after investigators obtain one version. Therefore, the paper recommends transferring seized digital assets into controlled wallets instead of relying only on access credentials.

South Korea recommends shared custody for seized digital assets

South Korea also proposed a shared custody model involving both courts and investigative authorities. The researchers argued that a single agency should not control seized digital assets because security risks remain. Instead, jointly managed wallets would reduce theft risks while strengthening oversight throughout legal proceedings.

The proposal also includes temporary custody measures for urgent situations involving potential asset transfers. Courts could authorize immediate movement of digital assets into designated temporary wallets before final custody arrangements. Authorities could complete transfers into jointly managed wallets after meeting legal requirements.

The proposal follows earlier efforts to strengthen digital asset security within public agencies. Earlier this year, the National Tax Service reviewed private custody providers after a security incident exposed a wallet recovery phrase. As a result, unauthorized parties transferred about $4.8 million in crypto assets, prompting broader reviews of seizure, storage, and disposal procedures across South Korea.