South Korea Supreme Court proposes crypto seizure rules

South Korea’s Supreme Court proposed amendments that set formal procedures for seizing and liquidating digital assets. Under the draft rules, a court-issued seizure order would immediately bar a debtor from transferring or disposing of specified digital assets and require the debtor to hand those assets to a court enforcement officer. The seizure would take legal effect when the enforcement officer receives the assets.

The draft gives courts authority to convert seized crypto into cash or to deliver assets directly to creditors. A court could issue a transfer order directing enforcement officers to deliver tokens to creditors at a value set by the court, or it could direct officers to sell the holdings. Enforcement officers would be permitted to move seized assets into dedicated accounts at virtual asset service providers for sale or to entrust sales to such providers. The draft permits officers to convert seized holdings into more liquid cryptocurrencies, such as bitcoin, before selling.

The proposed changes expand provisional measures intended to prevent debtors from hiding or shifting crypto while civil litigation is pending. Those measures would allow preliminary seizure and injunctions tailored to digital assets, including powers to freeze or restrict access to wallets and accounts linked to a debtor’s holdings during dispute resolution.

The court cited a rise in civil cases involving cryptocurrencies and a lack of specific enforcement procedures as reasons for the revisions. The draft will be open for public comment until Aug. 11, and the court expects the amendments to take effect in October.

The draft details responsibilities for enforcement officers handling digital assets, including custody, valuation and sale processes, and outlines cooperation with virtual asset service providers to facilitate liquidation. The rules specify when seizure takes effect and how assets may be converted or sold, creating a consistent framework for cases involving different tokens and wallet types.

The public comment period invites feedback from creditors, debtors, legal professionals and virtual asset service providers on operational details such as custody arrangements, valuation methods and the use of third-party services for sales.