South Korea is drafting legislation to enable law enforcement to seize cryptocurrencies held in self-custody wallets, such as hardware wallets, by transferring seized assets into jointly managed accounts overseen by courts and investigative authorities. The proposed amendments to the Criminal Procedure Act aim to fill a significant gap in existing seizure laws that currently lack clear procedures for digital assets controlled directly by private keys rather than held on centralized exchanges.

Why Are Current Seizure Laws Insufficient for Self-Custody Assets?

South Korea's existing criminal seizure procedures were designed for traditional assets and centralized cryptocurrency exchanges. A 2025 Supreme Court decision validated seizure procedures for exchange-held Bitcoin, but that framework does not adequately address assets stored in self-custody wallets, where individuals hold private cryptographic keys that grant exclusive control over their funds. This legal blind spot has created enforcement challenges for investigators attempting to secure digital assets during criminal investigations.

The gap between current law and digital asset reality reflects a broader challenge facing regulators worldwide. Self-custody wallets, including hardware wallets that store private keys offline, operate outside the traditional financial infrastructure that regulators have historically monitored. Without clear legal procedures, authorities lack standardized methods to safely seize, transfer, and manage these assets while maintaining chain-of-custody integrity and preventing theft or misuse.

What Safeguards Does South Korea's Proposal Include?

Rather than simply transferring private keys to government custody, South Korea's draft law recommends a more sophisticated approach designed to reduce risks associated with centralized key control. The proposal includes specific requirements for seizure warrants that must detail the asset type, quantity, wallet address, and transfer methods. To mitigate potential theft or misuse, seized cryptocurrencies would be transferred into jointly managed wallets overseen by both courts and investigative authorities, rather than relying solely on access credentials held by a single party.

This dual-custody model reflects lessons learned from cryptocurrency theft and mismanagement cases globally. By distributing control between judicial and law enforcement entities, the framework aims to enhance security and legal oversight while reducing the risk that seized assets could be stolen or diverted during the investigation process.

How to Understand the Implications of Seizure Procedures for Self-Custody Wallets

• Private Key Control: Self-custody wallets give individuals exclusive control over their digital assets through private cryptographic keys, unlike exchange accounts where a third party manages access and custody.
• Seizure Warrant Requirements: South Korea's proposal mandates that seizure warrants specify the exact asset type, quantity, wallet address, and approved transfer methods to ensure legal clarity and prevent unauthorized seizures.
• Joint Custody Model: Rather than transferring private keys to a single authority, the framework proposes jointly managed wallets controlled by both courts and investigative agencies to reduce theft risk and enhance transparency.

The South Korean proposal represents one of the first comprehensive legal frameworks addressing the unique challenges of seizing self-custody digital assets. As cryptocurrency adoption expands globally, other jurisdictions will likely face similar questions about how to balance law enforcement needs with the security and privacy protections that self-custody wallets are designed to provide.

The timing of this proposal reflects growing regulatory maturity in the cryptocurrency space. South Korea has emerged as a leader in crypto regulation, and this amendment demonstrates how policymakers are working to adapt traditional legal frameworks to accommodate digital asset realities. The proposal acknowledges that self-custody wallets are legitimate financial tools while establishing procedures to ensure law enforcement can still pursue criminal investigations effectively.

As the proposal moves through South Korea's legislative process, it will likely influence how other countries approach similar challenges. The framework's emphasis on joint custody and detailed warrant requirements could become a model for balancing law enforcement authority with the security principles that make self-custody wallets attractive to cryptocurrency users in the first place.