Dunamu, the operator of South Korea’s largest crypto exchange Upbit, has secured a one-year contract to manage digital assets confiscated by the country’s National Police Agency.
Under the agreement, seized cryptocurrencies from criminal investigations will be stored through Upbit Custody, Dunamu’s institutional digital asset custody service.
The contract comes after several incidents involving cryptocurrency that reportedly went missing while being held by South Korean authorities, increasing pressure on law enforcement agencies to improve how seized digital assets are stored and protected.
Dunamu Wins South Korean Police Crypto Custody Contract
Dunamu confirmed on Aug. 7 that it had been selected as the final contractor for the National Police Agency’s digital asset custody project.
The company moved from preferred bidder status to final contractor after completing technical negotiations with the agency.
The agreement will run for one year.
During that period, cryptocurrencies confiscated in police investigations will be placed under Dunamu’s custody infrastructure rather than being managed solely through traditional law enforcement storage procedures.
Upbit Custody Will Store Seized Cryptocurrencies
The assets will be managed through Upbit Custody.
Dunamu says the platform is designed for institutional-grade storage and operates continuously throughout the year.
The company described the service as running under a 24-hour, 365-day monitoring system, including nights, weekends and public holidays.
Continuous monitoring is particularly important for cryptocurrency because digital assets can be transferred globally at any time.
Unlike traditional physical evidence, a compromised private key could allow funds to be moved almost instantly.
Contract Was Awarded Through Public Tender
The project was awarded through an open competitive procurement process administered by South Korea’s Public Procurement Service.
Dunamu said it received the highest technical evaluation before being selected as the final contractor.
The company had already been named the preferred negotiating bidder on July 8.
Earlier procurement documents valued the one-year contract at approximately 267 million won, equivalent to roughly $195,000.
The contract covers custody and management of digital assets seized during criminal investigations.
Dunamu Received the Highest Evaluation Score
During the bidding process, Dunamu ranked first among competing custody providers.
According to procurement records cited in the report, Dunamu received a combined evaluation score of 94.73.
The score included full marks for its bid price and 84.73 points in the technical assessment.
Korea Digital Asset Custody, or K-DAC, finished second with a score of 91.29.
Hecto Wallet One ranked third with 87.27 points.
Dunamu’s technical infrastructure and ability to meet the police agency’s operational requirements helped it secure the contract.
Seized Assets Will Be Stored in Offline Cold Wallets
One of the most important features of the custody arrangement is the use of offline wallets.
Dunamu says Upbit Custody stores assets using 100% offline cold wallet infrastructure.
Cold wallets are designed to remain disconnected from the public internet.
This greatly reduces exposure to remote cyberattacks.
However, offline storage alone does not eliminate every security risk.
Private key management, internal access controls and recovery procedures remain equally important.
Upbit Custody Uses MPC Security
Dunamu says its custody system incorporates Multi-Party Computation, commonly known as MPC.
MPC is designed to reduce reliance on a single private key or individual.
Instead of storing complete signing authority in one place, cryptographic operations can be distributed across multiple parties or systems.
A transaction can then require several components to work together before authorization is completed.
This reduces the risk that compromising a single device or employee automatically gives an attacker full control of the assets.
Distributed Key Generation Adds Another Security Layer
The custody infrastructure also uses Distributed Key Generation, or DKG.
DKG allows cryptographic key components to be created across multiple participants without requiring one party to generate and store the complete private key.
This can make it more difficult for attackers to compromise a wallet through a single point of failure.
For law enforcement custody, where seized cryptocurrency may remain stored for long periods, reducing such vulnerabilities is particularly important.
Multi-Signature Controls Are Also Used
Upbit Custody also incorporates multi-signature technology.
Multi-signature wallets require more than one authorization before a transaction can be approved.
Instead of allowing one person or device to move funds, a predetermined number of authorized signatures must approve the transfer.
This can provide additional protection against:
- Internal misuse
- Stolen credentials
- Compromised devices
- Human error
- Unauthorized withdrawals
The exact operational procedures used for police assets were not fully detailed in the announcement.
Separate Wallets Will Be Used for Different Assets
Dunamu also uses wallet segregation.
This means different assets or categories of funds can be stored separately instead of being combined into a single wallet.
Separating assets can improve both security and recordkeeping.
For law enforcement, it may also make it easier to connect particular cryptocurrency balances to specific criminal cases.
Segregated wallets can help investigators maintain clearer evidence trails and reduce the risk of accidentally mixing funds from unrelated cases.
Round-the-Clock Monitoring Is a Key Requirement
The National Police Agency required the selected provider to maintain continuous operational support.
Cryptocurrency markets never close.
Transactions can occur at any time of day, including weekends and public holidays.
A custody provider therefore needs systems capable of identifying suspicious activity immediately rather than waiting for normal business hours.
Dunamu says its infrastructure can provide this continuous monitoring.
Dunamu Says Security Will Support Police Operations
A Dunamu representative said the company plans to use its security technology and operational controls to support South Korea’s public safety and digital policing infrastructure.
The contract represents another example of private-sector crypto infrastructure being used by government agencies.
As cryptocurrency becomes increasingly common in financial crime investigations, law enforcement agencies need specialized systems for storing, tracing and eventually disposing of seized assets.
Traditional evidence storage procedures are often not designed for blockchain-based assets.
Some Industry Participants Questioned Tender Requirements
The bidding process attracted criticism from parts of South Korea’s digital asset custody industry.
Some industry participants reportedly argued that the contract requirements favored large companies with existing exchange infrastructure.
The tender required the successful bidder to immediately accept seized cryptocurrencies, provide round-the-clock support and guarantee full compensation if assets were lost through hacking.
Smaller standalone custody providers may find those requirements more difficult to satisfy.
Large exchanges generally have more established infrastructure, larger security teams and greater financial resources.
Police Denied Tender Was Predetermined
The National Police Agency rejected suggestions that Dunamu had been effectively guaranteed the contract.
Authorities said the provider had been selected through a fair competitive bidding process.
Dunamu’s technical evaluation and price score placed it ahead of the competing providers.
The final appointment followed negotiations after the company had initially been chosen as the preferred bidder.
The process was conducted through the national procurement system rather than through a direct private agreement.
Missing Bitcoin Cases Increased Pressure on Authorities
The decision to outsource crypto custody comes after several incidents involving cryptocurrencies that reportedly disappeared while being held by South Korean authorities.
These cases raised questions about how police departments and prosecutors manage digital assets after they are seized.
Physical evidence can be locked in a secure facility.
Cryptocurrency requires a different approach.
Anyone who gains access to the relevant private key or recovery information may be able to transfer the funds without physically taking the storage device.
22 BTC Disappeared From Police Custody
One major incident was confirmed in February.
South Korea’s Gangnam Police Station said that 22 BTC had disappeared from police custody.
The Bitcoin was worth approximately 2.1 billion won, or around $1.6 million, according to the figures cited in the report.
The assets had originally been surrendered during a 2021 investigation.
Authorities later discovered during a nationwide review that the Bitcoin had been transferred from its storage wallet without authorization.
Physical Cold Wallet Remained With Police
The case highlighted one of the unusual security problems associated with digital assets.
Police reportedly still possessed the physical cold wallet device.
Yet the Bitcoin had been transferred.
That suggested that someone may have obtained access to the private keys or other information needed to control the wallet without physically stealing the device.
The Gyeonggi Northern Provincial Police Agency subsequently opened an internal investigation.
Investigators reportedly examined access records, key management procedures and blockchain transactions.
Private Keys Matter More Than the Device
The incident demonstrates a fundamental rule of cryptocurrency custody.
Possessing a hardware wallet does not necessarily mean possessing exclusive control over the cryptocurrency.
The blockchain recognizes private keys, not physical devices.
If another person obtains the private key or recovery seed, they can potentially recreate the wallet elsewhere and transfer the assets.
This means evidence management procedures must protect both hardware and the cryptographic information associated with it.
Upbit Custody’s use of distributed security methods is designed partly to reduce this type of single-key risk.
Another Case Reportedly Involved 320 BTC
South Korean authorities had already faced scrutiny over another case involving the Gwangju District Prosecutors’ Office.
Local reports said approximately 320 BTC seized during a criminal investigation had been lost.
Another incident involving missing seized Bitcoin was reportedly identified in 2022.
These events increased concern about whether government agencies had sufficient infrastructure and expertise to manage confiscated digital assets safely.
The police custody project appears to be part of a broader attempt to address that problem.
Crypto Evidence Requires Specialized Security
Handling seized cryptocurrency can be more complicated than storing cash or physical property.
Law enforcement agencies must consider:
- Private key security
- Wallet backups
- Access permissions
- Blockchain network compatibility
- Transaction monitoring
- Evidence records
- Asset valuation
- Authorized transfers
Any mistake can have serious consequences.
A lost private key can make assets permanently inaccessible.
A compromised key can allow someone to transfer the cryptocurrency almost immediately.
External Custody Could Reduce Internal Risk
Using a dedicated institutional custodian may reduce some of the operational risks faced by police departments.
Instead of individual investigators managing wallet keys, custody responsibilities can be transferred to a specialist provider with dedicated security infrastructure.
The police agency can then maintain oversight while the custodian manages technical storage.
This could reduce the number of people with direct access to sensitive key material.
However, outsourcing also creates dependency on the external provider.
Strong auditing and contractual oversight remain necessary.
Full Compensation Requirement Raises the Stakes
One notable tender requirement was the obligation to compensate for assets lost through hacking.
That condition places substantial financial responsibility on the custodian.
For a provider holding potentially large amounts of seized crypto, the value of assets under custody could exceed the annual contract value by a wide margin.
This makes security failures potentially very expensive.
It also helps explain why companies with larger balance sheets and established custody systems may have had an advantage in the bidding process.
Dunamu Brings Upbit Infrastructure to Government Custody
Dunamu is best known as the operator of Upbit, one of South Korea’s largest cryptocurrency exchanges.
Its existing infrastructure gives the company experience handling large volumes of digital assets.
The police contract extends that expertise into a government-related custody service.
The arrangement does not mean police assets will be used for trading through Upbit.
The seized cryptocurrencies will instead be stored through the separate Upbit Custody platform.
Custody and Exchange Services Are Different
Crypto exchange services and institutional custody serve different purposes.
An exchange allows users to buy and sell assets.
A custody service focuses on secure storage and controlled access.
For seized assets, trading access is generally not the priority.
Security, evidence integrity and authorization procedures matter more.
The government needs to ensure that confiscated assets remain intact until a court or other legal authority determines what should happen to them.
Government Crypto Seizures Are Growing
Law enforcement agencies around the world are dealing with increasing amounts of cryptocurrency connected to criminal investigations.
Digital assets can appear in cases involving:
- Fraud
- Money laundering
- Ransomware
- Drug trafficking
- Illegal gambling
- Cybercrime
- Investment scams
When authorities confiscate these assets, they need systems capable of securing them for months or even years.
This has created a growing market for institutional custody providers capable of working with government agencies.
South Korea Is Strengthening Digital Asset Enforcement
South Korea has become one of the world’s most active cryptocurrency markets.
Authorities have also tightened oversight of exchanges, wallet providers and other virtual asset businesses.
The police custody contract shows that regulators and law enforcement are now focusing not only on supervising private crypto companies but also on improving their own handling of digital assets.
Secure government custody is becoming an important part of broader crypto enforcement infrastructure.
Blockchain Records Could Improve Evidence Tracking
One advantage of cryptocurrency is that blockchain transactions can provide a permanent public record.
Investigators can verify when assets entered or left specific addresses.
This can help establish whether seized funds remained untouched during an investigation.
However, blockchain transparency does not automatically identify the person controlling a wallet.
Strong internal records are still needed to document who had authority to approve transactions and why.
Combining blockchain evidence with institutional custody records could improve accountability.
One-Year Contract Could Become a Test Case
The contract lasts one year.
That makes the arrangement a useful test of whether outsourced institutional custody can improve South Korean law enforcement’s management of seized cryptocurrency.
Authorities will likely pay close attention to:
- Security incidents
- Operational response
- Audit records
- Asset recovery procedures
- Custody accuracy
- Compliance with contract requirements
A successful arrangement could potentially influence how other government agencies manage digital assets.
Previous Losses Put Security Under Greater Scrutiny
The earlier cases involving missing Bitcoin make the success of the Dunamu contract particularly important.
Any further loss involving seized digital assets would likely receive significant public and regulatory attention.
Dunamu therefore faces both financial and reputational pressure to maintain strong security.
The combination of offline storage, MPC, DKG, multi-signature authorization and wallet segregation is designed to reduce the possibility of another unauthorized transfer.
Upbit Parent Takes Responsibility for Seized Crypto
For the next year, Dunamu will take a central role in protecting cryptocurrencies confiscated by South Korea’s National Police Agency.
The decision follows a competitive tender in which the company received the highest evaluation among participating custody providers.
Through Upbit Custody, seized assets will be held in offline wallets supported by continuous monitoring and layered cryptographic controls.
The move comes after previous incidents exposed weaknesses in the way South Korean authorities stored Bitcoin internally.
By transferring technical custody responsibilities to a specialist provider, the police agency is attempting to reduce those risks while maintaining oversight of assets connected to criminal investigations.
The success of the arrangement could become an important example of how governments manage cryptocurrency evidence as digital asset seizures become increasingly common.
