South Korea’s National Police Agency (KNPA) has drafted its first comprehensive guidelines for managing seized cryptocurrencies, including privacy-focused assets often referred to as “dark coins,” as authorities seek to strengthen oversight following repeated losses of confiscated digital assets.
According to a report by Asia Economy on March 17, the directive outlines compliance requirements across every stage of virtual asset seizure, storage, and management
Notably, it introduces, for the first time, specific measures for handling software wallets, or “hot wallets,” which are required to manage privacy-centric cryptocurrencies.
Unlike conventional cryptocurrencies such as Bitcoin, where transaction records are publicly verifiable on blockchain networks, privacy coins are designed to obscure transaction details. These assets can conceal sender and receiver identities as well as transaction amounts, making them significantly harder to trace. This anonymity has led to their frequent use in illicit activities, including cybercrime and money laundering.
One high-profile example cited is the Nth Room case, in which digital assets were used to facilitate illegal payments tied to the distribution of exploitative content. The case involved Cho Joo-bin, who operated a criminal network on Telegram.
The new guidelines also reflect broader concerns about the misuse of privacy coins by state-backed actors. Authorities have previously pointed to North Korean government entities leveraging such assets to launder funds obtained through cyberattacks and crypto hacks.
Under the updated framework, investigators handling standard cryptocurrencies typically rely on hardware wallets, or “cold wallets,” secured with cryptographic recovery phrases
However, privacy coins require dedicated software installed on secure systems, with private keys stored digitally rather than on physical devices, introducing new operational risks.
A KNPA spokesperson emphasized the need for structured protocols as investigative practices evolve
“In the past, seized assets were stored in warehouses. Now we must manage wallet addresses and private keys,” the official said.
The move signals a growing recognition among law enforcement agencies of the technical complexities involved in securing digital assets and the need for standardized procedures in an increasingly crypto-driven crime landscape.
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