South Korea tax officials call for law change on self-custodied crypto seizures

South Korea should revise its Criminal Procedure Act to make the seizure of self-custodied virtual assets lawful and workable, National Tax Service officials argued in a recent academic paper. The proposal focuses on crypto held in personal wallets, including hardware wallets, where users control private keys rather than relying on an exchange or other third-party custodian. The authors said a 2025 Supreme Court ruling finding investigators acted lawfully when seizing Bitcoin in an exchange wallet confirmed that digital assets can be treated as property subject to seizure during criminal investigations, but did not resolve how authorities should enforce seizures in self-custody cases. They argued that simply obtaining a wallet device or access credentials may not stop a suspect from moving assets, because the same credentials could still be retained elsewhere. That makes crypto seizure structurally different from seizing physical property or freezing bank accounts. The paper said effective enforcement would require transferring assets to another address, but Article 120 of the current law was not designed for blockchain-based assets and lacks procedural requirements covering the asset type, wallet addresses, transfer method and custody arrangements. The authors also said existing preservation rules before confiscation do not fully prevent disposal because they do not authorize transfers to another controlled address. To address those gaps, the paper proposed special statutory rules requiring warrants to state the asset type and amount, the verified wallet address, the destination address, the transfer method and how the assets will be stored. It also argued against sole control by investigators, recommending jointly managed wallets involving the court and investigative authorities, with temporary court-designated addresses for urgent cases. The proposal follows recent National Tax Service efforts to tighten crypto custody after a February security lapse exposed a wallet recovery phrase in an official press release and unauthorized parties later moved about $4.8 million in seized assets.