South Korea moves to formalize crypto seizure in debt collection

The draft mandates that once a court issues a seizure order, virtual asset service providers and exchanges must immediately restrict a debtor’s access to their holdings. This prohibition prevents the movement or disposal of assets, effectively locking them until the court completes the liquidation process. Creditors gain the authority to petition courts for disclosure of a debtor’s specific holdings, including the type, quantity, and the status of any existing liens or priority claims attached to those assets.

Liquidation procedures offer two primary pathways: direct transfer orders to a creditor or court-approved sales through exchanges. In instances of low liquidity or obscure tokens, enforcement officers may authorize the exchange of assets for more stable digital currencies to facilitate a cash-out. These measures follow recent efforts by the Financial Services Commission to tighten oversight, including mandatory disclosures of crypto holdings for individuals seeking debt relief under the New Start Fund. The Supreme Court is accepting public commentary on the proposed rules through August 11.