South Korea will urgently review the management of confiscated cryptocurrencies and tighten custody controls following a National Tax Service (NTS) error that reportedly led to an unauthorized transfer of seized tokens, the country’s finance minister said.
Deputy Prime Minister and Minister of Finance and Economy Koo Yun-cheol said Sunday that the government, together with agencies such as the Financial Services Commission and Financial Supervisory Service, would inspect the status and management of digital assets held by public institutions through seizures from delinquent taxpayers.
Koo also emphasized that the government does not hold cryptocurrencies outside of assets obtained through enforcement actions.
Investigation follows exposed recovery phrase
The announcement comes after criticism over a Feb. 26 NTS press release that inadvertently revealed the recovery phrase of a seized crypto wallet. Onchain data later showed roughly 4 million PRTG tokens worth about $4.8 million but with limited liquidity were moved shortly after the leak, according to Korea JoongAng Daily.
The NTS provided an apology:
“We failed to recognize that the original photo contained sensitive virtual asset information and provided it to the media without proper caution,” the NTS said in a statement.
Authorities are investigating claims that the tokens were returned, the Korean National Police Agency’s Cyber Terror Response Division reported receiving a tip from an individual claiming to have accessed the crypto and returned it the following day, which police are now verifying.
“This is entirely the National Tax Service's fault.”
Regulators tighten access to crypto platforms
At the same time, South Korea is tightening how digital asset platforms operate and reach users as part of a broader regulatory shift. Lawmakers have approved amendments to the Capital Markets Act and the Electronic Securities Act that formally introduce a legal framework for security token offerings, defining them as securities issued and managed on blockchain-based distributed ledgers. The new regime will be overseen by the Financial Services Commission and is scheduled to take effect in January 2027 after a one-year preparation period, bringing blockchain-based debt, equity, and investment contract products under existing financial law.
App store access is tightening in parallel.
Google Play now requires exchanges and wallet providers to register as virtual asset service providers with South Korea’s Financial Intelligence Unit to remain listed.
From Jan. 28, 2027, Android users in South Korea will no longer be able to download or update apps from unregistered overseas exchanges. Only 27 domestic platforms, including Upbit and Bithumb, currently meet the requirement, leaving global exchanges like Binance, Bybit, and OKX effectively blocked from the Play Store.
Siwon Huh, a researcher at South Korean crypto research firm Four Pillars, said Android dominance makes enforcement impactful, noting that browser-based trading or sideloaded apps are “not realistic” for most users. He also observed that the policy appears to stem from Google’s own rules rather than a direct government order, though it aligns with the regulators’ broader efforts.
Maryna Hornieieva
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