South Korea drafts rules for court-ordered crypto seizures

South Korea, where more than 16 million people—roughly one-third of the population—hold cryptocurrency accounts, is in the process of formulating one of the tightest judicial frameworks anywhere when it comes to seizing digital assets for satisfying civil debts.

The country’s Supreme Court published proposed amendments to the Rules of Civil Execution on July 2, opening a public consultation through Aug. 11 before the rules are scheduled to take effect on Oct. 1.

Instead of ruling on the validity of the seizure of cryptos (an issue often taken up by Korean courts in recent years), the new law outlines the manner in which the courts should apply enforcement measures to the freezing, transfer and liquidation of virtual assets.

New rules for crypto seizures

According to the Supreme Court, virtual assets are “intangible property with economic value,” and the growing number of enforcement cases involving cryptos now requires standardized judicial procedures.

The introduced set of regulations outlines the steps to be followed throughout the process of enforcement, starting from freezing the digital assets and ending with their conversion into money for the creditors.

The rules are applicable to both cryptos that are owned directly by the entities that owe the creditors (debtors) and the contractual claims for the assets stored in the central exchanges by means of a contract.

After the seizure of the assets is ordered by the court, the debtor cannot anymore transfer or dispose of the assets. The exchanges storing the cryptocurrencies must hand them over to the law enforcement officer, and only after that the seizure will be considered legally sound.

Later, the creditor can either obtain their crypto directly or obtain permission from the court to liquidate it. In the second case, the enforcement officer has to set up the account with a virtual asset service provider (VASP), obtain the assets which were seized from the debtor, and decide what to do with them: whether to sell them at the market price or convert illiquid tokens into more marketable cryptocurrencies before selling them.

The proposal is particularly important in the case of exchange-held assets, as the court is enabled to order the custodians to comply with its orders. In the case of self-custody wallets, it is more complicated to do so.

Addressing illiquid tokens

An important aspect of the amendment is that it addresses the issue of illiquid altcoins that have been a major challenge in the application of cryptocurrency law.

Illiquid tokens can usually not be tied to Korean won by some people, which means that the creditors are stuck with the assets that are of unknown value.

The law will allow enforcement officers to exchange the seized assets for currency or withdrawal claims that are easier to convert before the actual sale takes place.

The amendment brings about the extension of preservation mechanisms and allows creditors to seek provisional sequestration and prohibition of disposal orders in advance of any litigation process. Thus, eliminating the possibility of debtors moving their digital assets before the enforcement of any ruling.

South Korea’s crypto enforcement framework

This proposal is created within the larger initiative of South Korea in legalizing digital assets

The Virtual Asset User Protection Act, which was enforced in July 2024, made virtual asset transactions safer and also imposed tougher restrictions on VASPs.

South Korea’s courts have also been moving toward clearer recognition of cryptocurrencies as property. In December 2025, the Supreme Court ruled that 55.6 Bitcoin held in a cryptocurrency exchange account could be confiscated in a money laundering case. The Court rejected the claim that Bitcoin was simply digital information rather than property, finding instead that assets held by an exchange have independent economic value and qualify as electronically managed property. That interpretation allows them to be seized under the Criminal Procedure Act.

Although the ruling affirmed that cryptocurrency in custody of a cryptocurrency exchange could be the subject of freezing in connection with a crime, the new rules concerning civil executions address how the courts will implement ordinary debt judgments involving digital currencies.

According to the Supreme Court, the amendment shows how much cryptocurrency ownership has grown, as well as the rise in civil enforcement cases concerning virtual money.

This initiative emerged as a result of issues over the ambiguities in the present regulations. One of the most discussed cases involved an investor who mistakenly transferred 5.45 billion SHIB to an exchange that no longer operates. Ultimately, the court ruled in favor of this individual and ordered the return of the funds, but the whole procedure showed how long it takes to get the money back and proved the vagueness of the regulations.

Why it matters

The public consultation will come to an end on August 11, after which the National Court Administration will be expected to complete the development of the rules, which would be effective starting October 1.

If the proposal is adopted largely in its current form, South Korea would join a small group of major crypto markets with detailed rules covering every stage of civil enforcement involving digital assets. The framework would spell out how courts can freeze cryptocurrencies, require exchanges to hand them over, transfer seized assets into court-controlled accounts and, ultimately, sell them to satisfy creditors’ claims.

For cryptocurrency exchanges, the biggest questions will be practical rather than legal. They will need to determine how quickly they can respond to court orders, how dedicated enforcement accounts will operate in practice, and how to deal with tokens that are thinly traded or difficult to liquidate.

The implications extend well beyond exchanges. South Korea has largely settled the question of whether cryptocurrencies can be treated as property. The next step is establishing a consistent process for enforcing legal claims against those assets. By turning judicial recognition into clear procedural rules, the Supreme Court is creating one of the most comprehensive frameworks yet for bringing digital assets into the mainstream civil enforcement system.

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