South Korea's National Tax Service officials have proposed amendments to the Criminal Procedure Act to enable seizure of self-custody crypto assets. Four NTS officials including Jang Hee-won published a paper in June in the Korean Institute of Criminology and Justice journal titled 'Limitations of Self-Custody Virtual Asset Seizure Execution and Legislative Review.' The proposal addresses enforcement gaps where individuals holding private keys to hardware wallets and personal wallets can dispose of assets even after seizure attempts. Current seizure procedures prove inadequate because self-custody digital assets are not subject to physical possession and asset holders retaining separate copies of private keys can transfer assets to evade confiscation.
Supreme Court Rules Exchange Wallet Bitcoin Seizure Lawful
The paper references Supreme Court decision 2025모45 issued in December of last year by the Second Division (presiding Justice Kwon Young-joon). The court ruled that investigative agencies' seizure of Bitcoin from crypto exchange wallets was lawful. The NTS paper describes this as "a decision that explicitly specifies Bitcoin's seizability in investigative procedures." However, the paper notes the decision did not provide specific execution methods for self-custody digital assets. Self-custody assets are not objects of physical possession, and even when private keys are seized, asset holders retaining separate copies can transfer and dispose of assets.
Criminal Procedure Act Article 120 Inadequate for Self-Custody Assets
The paper identifies limitations in applying existing legal principles under Criminal Procedure Act Article 120, which defines seizure and search warrant execution procedures. The article states "in executing seizure and search warrants, doors may be opened or unsealed and other necessary measures taken." The paper argues this provision cannot be applied directly to self-custody digital assets because transferring assets from existing addresses to new addresses differs from traditional seizure. The current law does not specify procedural controls for digital asset types, quantities, addresses, or custody entities. The paper also notes that provisional seizure legal principles (systems prohibiting asset disposal to preserve judgment execution) cannot eliminate the possibility of asset holders transferring digital assets to other addresses.
NTS Officials Propose Tri-Party Custody Structure and Warrant Requirements
The paper proposes specific Criminal Procedure Act amendments establishing special provisions for self-custody digital asset seizure execution. When suspects or owners possess private keys or access means, warrants must specify: (1) types and quantities of digital assets to be seized, (2) confirmed addresses, (3) addresses to receive transfers, (4) transfer methods, (5) post-transfer custody methods. The paper recommends a joint management address structure involving courts, investigative agencies, and asset holders rather than single-agency controlled wallets to prevent theft risks. If asset holders pose disposal risks and immediate transfer to joint addresses proves difficult, courts may designate and manage temporary addresses for priority transfers. The paper states "the core is to clarify address transfer requirements, warrant specifications, receiving addresses, transfer methods and custody arrangements, and to store transferred virtual assets in a three-party joint management structure involving courts, asset holders or rights holders, and investigative agencies rather than investigative agency-only addresses."
FAQ
What did South Korea's National Tax Service officials propose in June?
Four NTS officials including Jang Hee-won published a paper in June proposing Criminal Procedure Act amendments to enable seizure of self-custody crypto assets held in personal wallets and hardware wallets.
Why does the paper argue current seizure laws are inadequate for self-custody crypto assets?
The paper states that Criminal Procedure Act Article 120 cannot be applied directly because self-custody digital assets involve address transfers rather than physical seizure, and asset holders retaining private keys can transfer assets to evade confiscation even after seizure attempts.
What custody structure does the NTS paper recommend for seized crypto assets?
The paper proposes a tri-party joint management structure involving courts, investigative agencies, and asset holders or rights holders rather than single-agency controlled wallets to prevent theft risks and ensure procedural controls.
