• South Korea orders a full review of seized crypto after police lost 22 Bitcoin in custody failure.
• Authorities will inspect digital asset management across agencies and tighten security controls.
• Prosecutors investigate bribery as the government moves to fix gaps in crypto oversight.

South Korea’s finance minister has ordered a full review of how government agencies manage seized digital assets after custody failures exposed control gaps.

Deputy Prime Minister and Finance Minister Koo Yun-cheol directed an urgent inspection of crypto holdings across public institutions. He moved after police and tax authorities mishandled confiscated assets. The review will examine how agencies store and monitor digital assets obtained through enforcement actions. Authorities will assess current security systems and internal controls.

Government Orders Immediate Audit

Koo instructed the Ministry of Economy and Finance to coordinate with the Financial Services Commission and the Financial Supervisory Service. Together, they will inspect custody practices linked to seizures and tax enforcement. The government aims to identify weaknesses and close oversight gaps. Officials will also draft stronger safeguards to prevent repeat losses.

The finance ministry confirmed that the state does not hold crypto as an investment. Instead, agencies retain digital assets only when they seize them in criminal or tax cases. This clarification followed public concern about the scale of government exposure to crypto markets.

Seoul Police Loss Sparks Reform Push

The review follows a case in Seoul’s Gangnam district involving lost Bitcoin. Police there failed to follow custody rules tied to seized assets. Officers allowed an external firm to manage the holdings. However, they did not secure or retain the private keys.

As a result, authorities lost access to 22 Bitcoin in 2022. The assets were worth about $1.4 million at the time. The loss remained undisclosed until a recent report brought it to light. Two suspects now face arrest in connection with the case. Prosecutors are also investigating possible bribery linked to the incident.

The episode revealed operational risks tied to crypto storage. Unlike traditional assets, digital tokens require strict key management. Without direct control of private keys, agencies cannot guarantee access. Therefore, officials now acknowledge the need for tighter custody standards.

Broader Scrutiny After Exchange Oversight Failure

The custody failure also follows criticism aimed at regulators. Weeks earlier, authorities faced questions over their oversight of the Bithumb exchange. Regulators did not detect an internal system flaw that credited users with large amounts of Bitcoin in error. That incident increased pressure on supervisory bodies.

Now, lawmakers and policy analysts are examining how state institutions handle digital assets. They argue that enforcement agencies must apply stronger technical expertise. Moreover, they stress the need for uniform national guidelines.

The finance ministry has not yet detailed specific reforms. However, officials confirmed that they will implement measures swiftly after the inspection concludes. The government plans to reinforce digital asset security and improve accountability standards.