South Korean Police Direct Departments to Use Upbit Custody for Seized Crypto
A hardware wallet can remain in police hands after the Bitcoin it once controlled is gone. South Korea’s National Police Agency has told investigative departments nationwide to use Dunamu’s Upbit Custody for eligible seized cryptocurrency, replacing a system in which each department managed assets on its own.
- Eligible assets will be held in offline cold wallets.
- Upbit will provide round-the-clock support and cover transfer fees.
- Segye Ilbo reports a 100% loss-compensation commitment, but the terms are unclear.
- Monero and other privacy-focused assets are excluded.
The change follows several security failures involving Bitcoin held by South Korean authorities. Previously, police departments bought hardware wallets and managed the devices and access credentials themselves. Under the new arrangement, a specialist provider handles custody, while police remain responsible for investigations and decisions about seized assets.
Past losses prompted a custody overhaul
In 2021, during an investigation into an illegal gambling website, Gwangju police began seizing 1, 798.3 Bitcoin. Someone who learned about the seizure used a mnemonic recovery phrase, a sequence of words that can restore access to a wallet, to withdraw funds. Investigators ultimately secured only 320.8 Bitcoin, according to Segye Ilbo. The report does not explain how the person obtained the phrase.
The case shows why safeguarding a physical wallet is not enough. Someone with the recovery phrase or other access credentials may be able to move funds without ever touching the device.
Bitcoin transferred to the Gwangju District Prosecutors’ Office was later lost in a phishing attack, then recovered. The reported information does not specify how much was lost or recovered.
In a separate case, 22 Bitcoin held in a hardware wallet at Seoul’s Gangnam Police Station went missing. Police confirmed the disappearance in February 2026 during a nationwide inspection, although the physical wallet remained in their possession. Authorities later arrested two suspects in connection with the case. The reported information does not say whether the Bitcoin was recovered.
How the Upbit custody arrangement works
Police departments nationwide have been told to use the external custody provider for eligible assets. The National Police Agency has issued operating manuals and arranged training. Assets will remain in offline, or “cold, ” wallets until they are returned to their owners, provisionally released, or transferred to prosecutors.
Segye Ilbo reports that physical storage devices will be kept in separate secure facilities operated by the company. Offline storage lowers exposure to internet-based attacks, but it cannot eliminate risks involving access, transfers, or human error.
The reported custody infrastructure uses multi-party computation (MPC) and distributed key generation. These are different ways of handling cryptographic key material, but the available details do not explain exactly how they are implemented. Dunamu’s service also uses multi-signature technology, which requires multiple authorizations for a transaction, along with separate wallet arrangements for different cryptocurrencies and storage purposes. The division of access and responsibility between police and Dunamu has not been disclosed.
Upbit will provide technical guidance for transfers across blockchain networks, pay the associated transaction fees, and offer police departments 24-hour support. Segye Ilbo also reports that Upbit will compensate police for 100% of losses involving assets in its custody. The available information does not spell out the commitment’s terms, exclusions, or claims process. It should not be treated as an unconditional public guarantee.
Not every seized cryptocurrency is covered. Monero and other privacy-focused assets are excluded and will continue to be managed with separate hardware wallets. Any other excluded assets have not been identified.
Procurement and accountability
Dunamu was selected through a public procurement process run by South Korea’s Public Procurement Service. It was named preferred bidder on July 8 and scored 94.14 points in the technical evaluation before negotiations. The final contractor selection followed on August 7, with a one-year agreement. The reported dates do not include a year, so the procurement timeline cannot be pinned down more precisely.
The tender called for immediate custody services, round-the-clock support, and compensation guarantees for asset losses. Some industry participants questioned whether requirements like these favored large cryptocurrency exchanges with established infrastructure. Police officials defended the selection, saying the contract was awarded through fair competition.
Moving custody out of individual departments may reduce the risk of recovery phrases being mishandled. But it also puts more responsibility in the hands of a private provider. Clear rules for authorizing transfers, auditing access, and responding to a loss matter just as much as the technology. A promise to cover losses helps, but it cannot replace transparent terms or sound controls.
When a criminal case is referred for prosecution, assets being transferred to prosecution authorities are to go into an account connected to them. That handoff also depends on clear records and well-defined access procedures.
Key questions and answers
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Why are South Korean police changing how they store seized crypto?
The change follows cases in which Bitcoin held by authorities went missing, including losses linked to a recovery phrase and a phishing attack.
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Which assets are covered?
Eligible seized cryptocurrencies will be held through Upbit Custody. Monero and other privacy-focused assets are excluded. The full eligibility criteria and any other exclusions have not been disclosed.
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Does Upbit guarantee compensation for every loss?
Segye Ilbo reports a commitment to compensate police for 100% of losses involving assets in custody. The terms and claims process have not been made public in the available information.
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What is the main trade-off in using an external custodian?
Specialist custody may reduce the risks of departments managing wallet credentials themselves, but it concentrates responsibility in a private provider. Transparent access controls, audits, and compensation terms remain essential.
