South Korea’s National Tax Service plans to introduce private crypto custody providers in the first half of the year to manage seized digital assets. This move follows incidents where mnemonic leaks led to asset theft, highlighting the need for more secure custody solutions.
How Are Seized Crypto Assets Stored?
As enforcement involving digital assets increases, regulators face a key challenge: how to securely store seized crypto assets such as Bitcoin. Traditional methods relying on manual key management are vulnerable to leaks and operational errors.
By adopting professional custody services, authorities can centralize the management of seized crypto assets and improve both security and operational control.
Key Requirements of South Korea’s Custody Framework
Under the new framework, custody providers must meet strict security standards, including system protection, organizational scale, and insurance coverage. Regulators also plan to implement a unified system covering asset seizure, storage, and liquidation.
Participants are required to report asset status regularly and respond promptly to any security incidents, reducing systemic risks.
Three Major Risks in Managing Seized Assets
The first risk is private key exposure, where leaked mnemonics can result in irreversible asset loss. The second is on-chain transaction risk, as complex fund flows make anomaly detection more difficult. The third is internal operational risk, where improper access control can lead to security breaches.
These risks require more than just custody solutions—they demand real-time monitoring.
How KYT Enhances Custody Security
KYT (Know Your Transaction) systems analyze blockchain transactions in real time, detecting abnormal fund flows and tracing asset movements. Even after unauthorized transfers, KYT can identify suspicious patterns and high-risk addresses.
Trustformer KYT provides multi-chain monitoring, dynamic risk scoring, and real-time alerts, enabling regulators to continuously assess risks and prevent asset loss during custody.
Building a Full Regulatory Lifecycle
South Korea’s initiative to establish a unified digital asset management structure reflects a shift toward integrated regulation. Combining custody systems with KYT monitoring ensures full lifecycle transparency from seizure to liquidation.
With Trustformer KYT, institutions can build auditable and traceable systems that enhance both security and compliance.
Conclusion
South Korea’s crypto custody initiative signals a broader global trend toward stronger digital asset regulation. In this evolving landscape, KYT-driven monitoring systems will be essential for securing seized assets and mitigating risks.