South Korea’s National Tax Service is seeking to select a private custody provider to handle seized crypto assets after a security lapse resulted in private keys being exposed and assets being transferred by unauthorized entities.

The National Tax Service has begun reviewing a plan to outsource custody of confiscated crypto assets, according to a report from ZDNet Korea.

The latest action follows a security mishap on Feb. 26, when a wallet recovery phrase was exposed in an official press release. Images of a Ledger cold wallet and a sheet of paper showing the mnemonic phrase were published. Subsequently, unauthorized transfers of crypto tokens worth about $4.8 million took place.

As such, the agency will now evaluate candidates based on several factors, including security requirements, company size, and whether the firm holds insurance under South Korea’s Virtual Asset User Protection Act, the report said.

A newly formed task force focused on digital asset management systems will lead the process. The task force is already working on several initiatives, including improving operational manuals covering the full lifecycle of seized assets, from seizure to storage and liquidation. It will also conduct internal assessments and personnel training.

Meanwhile, the task force will also work toward establishing a dedicated division to oversee crypto-related work.

An NTS official cited in the report said responsibilities are split across departments, but added that preparations are underway to create a centralized unit.

The NTS incident is one of the many that have surfaced across South Korea over the past months. At least two other similar incidents were recorded involving law enforcement and other agencies, where seized crypto assets were lost or compromised.

As previously reported by crypto.news, South Korea’s National Police Agency has introduced new guidelines for handling seized cryptocurrencies. Law enforcement agencies would now have to follow standardized procedures when handling wallet addresses, private keys, and storage systems.

Key Highlights

• National Tax Service transitions to external custodians following $4.8M breach.

• Public exposure of seed phrase triggers comprehensive custody reform.

• Custodian selection prioritizes insurance coverage and proven track records.

• Dedicated oversight team will centralize confiscated asset management.

• Reform initiative matches international best practices for digital custody.

Following a significant security incident, South Korea’s National Tax Service has announced plans to engage private custody solutions for managing confiscated digital currencies. The agency inadvertently revealed a wallet’s recovery phrase in publicly released documentation on February 26, enabling unauthorized withdrawals totaling $4.8 million. Officials are implementing comprehensive safeguards to eliminate similar vulnerabilities and enhance asset protection protocols.

The security lapse centered on an insufficiently redacted photograph displaying a Ledger hardware wallet alongside its complete mnemonic recovery sequence. This episode exposed critical gaps in South Korea’s current framework for managing government-controlled digital holdings. The tax authority intends to transfer custody responsibilities to specialized providers equipped with robust security infrastructure and comprehensive insurance policies.

This strategic pivot occurs as regulatory expectations intensify for appropriate virtual asset stewardship. The National Tax Service has established a target completion date within 2026’s first two quarters for finalizing custodian partnerships. The initiative represents South Korea’s commitment to professionalizing its approach to handling seized cryptocurrency holdings.

Evaluation Framework and Administrative Safeguards

The tax agency is constructing comprehensive benchmarks for assessing prospective custody partners. Security qualifications encompass cutting-edge cybersecurity protocols, multi-party authorization systems, and hardened storage infrastructure. Candidates must carry insurance mandated by South Korea’s Virtual Asset User Protection Act, providing safeguards against system breakdowns and operational mishaps.

Company scale and fiscal soundness represent critical evaluation components in South Korea’s vetting framework. Prospective custodians must showcase expertise managing substantial digital currency portfolios for governmental or institutional clientele. Operational clarity, comprehensive audit mechanisms, and robust contingency planning will serve as fundamental prerequisites during the selection phase.

South Korea’s NTS is assembling a dedicated supervisory unit to manage the custodian selection initiative. This team will develop standardized operating procedures, employee education programs, and comprehensive management strategies for confiscated digital holdings. The centralization effort seeks to consolidate functions presently distributed among various administrative units.

Historical Context and Legal Framework

South Korea’s recent custody failure adds to previous incidents, including municipal law enforcement’s loss of 22 Bitcoin. Responding to these setbacks, government authorities initiated a multi-department investigation examining asset management practices and identifying preventive measures. This coordinated response demonstrates a systematic commitment to protecting South Korea’s expanding inventory of confiscated cryptocurrencies.

The Virtual Asset User Protection Act establishes the regulatory foundation supporting South Korea’s custody transformation. This legislation requires insurance coverage, regulatory compliance, and reserve holdings for all authorized service operators. South Korea’s policy direction aligns with worldwide patterns where governmental bodies increasingly depend on specialist custodians for blockchain-based assets.

The forthcoming custody infrastructure will create uniform processes governing seizure activities, secure storage, and eventual liquidation of digital currencies. South Korea plans to strengthen technical capabilities, encompassing wallet administration, cryptographic key management, and distributed ledger surveillance. This framework additionally prepares South Korea to extend professional custody services throughout various governmental departments.

South Korea’s National Tax Service anticipates that engaging private custodians will substantially diminish security vulnerabilities and procedural breakdowns. This strategic shift demonstrates enhanced institutional capacity for cryptocurrency-related enforcement activities. The implementation of specialized custody partnerships underscores South Korea’s dedication to secure, compliant administration of seized virtual assets.

Bitcoin (BTC) has endured a 14-month bear market against gold, with the BTC/gold ratio and momentum indicators at historic lows that previously marked cycle bottoms.

Key takeaways:

• The BTC/GOLD ratio is at historic lows as multiple indicators hint at a cycle bottom.

• Bitcoin price must hold $70,000 to avoid a deeper drop over the coming weeks.

BTC/GOLD RSI, MACD print classic reversal signal

Data from TradingView reveals that the relative strength index (RSI) of the BTC/GOLD ratio has begun climbing.

The weekly RSI reached its most oversold level of 21 in mid-February, signaling fading bearish momentum.

Related: Bitcoin tests old 2021 top as gold falls to six-week lows under $4.7K

Similarly, the moving average convergence divergence (MACD) indicator has dropped to its lowest level ever and is about to produce a bullish cross.

Note that previous bullish crosses, particularly coming after the RSI has recovered from oversold conditions, have marked macro bottoms for the ratio.

This ultimately led to 280%-620% Bitcoin price breakout against gold, as seen in 2019, 2021, and 2023.

The RSI has now recovered to 33 from 21 in mid-February. When combined with a buy signal on the MACD, the picture begins to resemble previous cycles.

“Bottom is in for $BTC vs Gold,” technical analyst James Easto said in an X post on Friday, adding that the “stage is set” for Bitcoin’s recovery.

The last time Bitcoin bottomed against gold was in November 2022. It marked the beginning of a 700% BTC price rally to its current all-time high of $126,000.

Analysts at GeoMetric said the past 3 BTC/GOLD bear markets have taken between 12-14 months, with the drawdowns ranging from 75% to 84%.

About 13 months have elapsed in the current cycle, which has “so far gone down 81%, surpassing the 2021 bear market,” the analysts said, adding:

“I think there is a solid case for a potential bottom here.”

Investor and analyst Crypto Fergani echoed both scenarios discussed above saying:

“For over 13 years, we’ve seen the same pattern:
Bitcoin enters a bear market against gold
that lasts roughly 400 days. During that time, the RSI
falls into deeply oversold territory. Historically, these phases have always marked the bottom.”

Bitcoin price must hold above $70,000

Meanwhile, BTC/USD remains cautiously bullish as long as it holds the $68,000-$70,000 support zone. This is where the 200-week exponential moving average (EMA) and 50-day simple moving average sit.

The 200-week EMA forms a key support band for BTC price during bear markets, and analysts warn that its reliability could be tested on Sunday’s weekly close.

Bitcoin analyst AlphaBTC said he had faith that Bitcoin will recover to $80,000 before dropping toward $50,000, as long as the price stayed above the weekly low at $68,800.

“I don’t want to see this week’s low lost, otherwise it’s going to break back down to range lows or lower!”

As Cointelegraph reported, holding $70,000 would align with a previous fractal recovery path, opening a move toward $76,000-$80,000.