Deputy Prime Minister Koo Yun-cheol ordered an inter-agency review of seized crypto wallets after the National Tax Service exposed a seed phrase in a press release.
South Korea’s Deputy Prime Minister and Minister of Economy and Finance, Koo Yun-cheol, has announced a cross-agency sweep of how the government and public institutions handle seized digital assets. The directive follows a significant security breach by the National Tax Service (NTS), which accidentally leaked a wallet seed phrase in a press release photo on Thursday.
The NTS published an image celebrating a tax evasion crackdown that clearly showed the full 12-word recovery phrase (seed phrase) for a confiscated hardware wallet. This critical security lapse effectively granted anyone who viewed the image full control over the wallet’s contents. Within hours, unknown actors drained the wallet of approximately 4 million Pre-Retogeum (PRTG) tokens, valued at roughly 6 billion won (around $4.8 million).
Government Orders Comprehensive Review of Seized Crypto Protocols
In a post on the social media platform X, Minister Koo stated that the government, in coordination with the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), would conduct a thorough review of the status and management of all digital assets seized from delinquent taxpayers. He emphasized the need to “promptly” strengthen security controls to prevent future incidents.
Koo also stressed a fundamental principle: “the state does not hold crypto beyond assets acquired through law enforcement actions.” This clarification underscores that seized assets are held for legal proceedings, not as a long-term investment strategy by the government.
A Pattern of Custody Failures in Public Sector Crypto Handling
The NTS’s error is not an isolated incident. South Korean authorities have previously faced scrutiny over separate custody failures. For instance, Seoul’s Gangnam police are alleged to have lost 22 Bitcoin (BTC), seized in connection with a 2021 hacking case, after leaving the funds with a third-party custodian. These recurring issues point to broader weaknesses in the public sector’s digital asset control frameworks.
The announced inspection aims to “prevent recurrence” of such high-profile losses. It represents a critical step as South Korean officials move to tighten the country’s overall virtual asset oversight framework, balancing enforcement with robust security protocols for seized holdings.
This incident serves as a stark reminder of the operational and security challenges public institutions face when handling decentralized digital assets. For taxpayers and the broader crypto community, it highlights the direct financial consequences of inadequate custody practices within government agencies.
Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently.
