This week, during a routine asset inspection at the Gwangju District Prosecutor's Office in South Korea, Bitcoin that had been seized and entrusted to the authorities was reported to be "suspected missing," drawing immediate public attention. Multiple media outlets cited sources claiming the amount involved is approximately 70 billion Korean won (about 48.55 million USD), yet the responsible agency responded with "unable to confirm this matter," adding further ambiguity to an already sensitive topic of cryptocurrency regulation. As the government becomes one of the largest holders of cryptocurrency in the country while cracking down on crime and seizing assets, even the most basic custodial processes may turn into sources of risk, raising a sharp question: who can truly manage these Bitcoins well?

The Cloud of 70 Billion Won Disappearance: Prosecutors Become the "Biggest Risk Point"

● The timeline of events is roughly clear: this batch of Bitcoin was initially seized in connection with a case at the Gwangju District Prosecutor's Office and should have entered an official custodial account as the subject asset for subsequent litigation and disposal. However, the real controversy erupted during a recent routine asset inspection, where personnel discovered that the Bitcoin that should have been on the books appeared to have "disappeared" from the actual controllable assets, exposing a gap in the assets.

● According to public information cited by several Chinese and Korean media outlets, the suspected loss amounts to about 70 billion Korean won, equivalent to approximately 48.55 million USD, but the authorities have not disclosed the specific number of Bitcoins or address information corresponding to this amount. This practice of "reporting only the amount, not the on-chain details" makes it difficult for outsiders to independently verify based on on-chain data, further deepening suspicions about the authenticity of the event and the level of internal management.

● Even more unsettling for the market is the official response from the Gwangju District Prosecutor's Office: when pressed by the media, they merely stated "unable to confirm this matter." This ambiguous statement neither denies the asset loss nor provides a clear internal investigation path, effectively admitting that there is a significant information black box in key procedures such as asset custody, audit records, and responsibility allocation, with procedural loopholes glaringly evident.

● On the technical and procedural level, there are not many facts that outsiders can ascertain: custodial assets inevitably involve private keys, custodial accounts, access permissions, and internal approval flows, but whether it is controlled by a single person, managed by multiple people, or outsourced to a third party remains unverified by public information. The only certainty is that "who holds it, who can issue the private key" becomes the core issue for investigation and accountability, and is also the most exposed institutional flaw in this cloud of suspicion.

Regulatory Missteps: How the Trust Crisis Ferments in the Community

● In the local cryptocurrency community in South Korea, the rumors of the Gwangju prosecutors "losing coins" immediately sparked concentrated doubts about the government's asset management capabilities. The public was already wary of the regulatory authorities' strict enforcement and frequent crackdowns, and now discovering that public power might not even be able to safeguard seized Bitcoins led to many community comments sarcastically stating: "It’s safer to hand them over to an exchange than to let them manage the coins." The backlash of trust quickly fermented.

● Unlike traditional seizures of cash, real estate, and vehicles, the fundamental logic of managing on-chain assets is "guarding the private key," rather than "locking up physical items." This presents a completely different risk model for government agencies accustomed to paper files and physical storage: permission management, signature thresholds, backup and recovery, cold storage and auditing—any oversight in these processes could directly lead to irreversible asset loss, exposing technical shortcomings.

● Thus, a highly ironic paradox emerges: regulators demand exchanges, project parties, and even individuals to continuously submit data and hand over "keys" at the rule level, strengthening control in the name of compliance; yet at the operational level, they cannot even manage their own "keys." This tension of "not knowing how to use the key but demanding the market to hand over the key" makes the gap between regulatory authority and technical capability unprecedentedly apparent.

● Looking globally, in the practices of confiscating, managing, and auctioning cryptocurrency assets, institutional gaps are actually very common. Whether judicial authorities transfer assets to official wallets or entrust third-party custodial institutions for cold storage, issues regarding permission allocation, responsibility attribution, and compensation mechanisms for unexpected losses have yet to form mature standards. The cloud of suspicion surrounding the Gwangju prosecutors is merely a magnified crack in this still-imperfect global framework.

Surge in Trading Volume and Fee Wars: The Cat-and-Mouse Game in the Korean Market

● In stark contrast to the chaos on the regulatory side, the trading enthusiasm in the local Korean market has not waned. According to data from a single source, the USDT trading volume on local exchanges recently surged by about 62%. Although there is a lack of more detailed breakdowns by platform and time period, this leap itself indicates that even with tightened regulations and frequent crackdowns, funds are still flowing in and out of the local market through dollar-pegged assets represented by USDT.

● At the exchange level, to compete for active users and liquidity, some platforms have introduced aggressive promotional policies such as zero trading fees for USDC transactions, driving transaction costs down to very low levels. This "fee war" is particularly glaring against the backdrop of regulatory pressure: while regulators attempt to block high-risk leverage and speculative channels, the market continues to seek new outlets for funds through cheaper and more convenient dollar-pegged asset trading.

● This has created a typical "cat-and-mouse game": on one side, the authorities emphasize cracking down on illegal fundraising and strictly controlling money laundering risks while actively seizing and confiscating cryptocurrency assets; on the other side, the community and speculative capital continuously increase their positions and turnover rates, using more refined assets and more fragmented trading frequencies to evade monitoring, with regulators and the market engaged in a tug-of-war both on-chain and off-chain.

● In this context, the "cloud of lost coins" from the Gwangju prosecutors undoubtedly further undermines users' basic trust in regulatory custody. For many holders, it is preferable to keep their assets in their own hands or with professional custodial institutions rather than entrusting them to an official wallet that cannot even safeguard its own assets. This psychological shift drives an increase in demand for self-custody wallets, over-the-counter matching, and even cross-border channels, accelerating the migration of funds beyond the regulatory view.

Pension Funds Buying Coins and Gold on the Blockchain: A Strong Contrast Between Institutional and Amateur Operations

● Almost simultaneously with the South Korean prosecutors' helplessness, Colombia on the other end of Latin America is taking a completely different route. The local pension institution AFP Protección announced the launch of a fund product containing Bitcoin allocations for approximately 8.5 million clients, exposing part of the pension assets to Bitcoin within a compliant framework. This means that the institution must rely on professional custody and strict risk control processes to meet the dual requirements of long-term stability and regulatory compliance for pension funds.

● On one side are institutions like Colombia's, which build compliant products through professional custody under regulatory permission; on the other side are the Gwangju prosecutors, who are suspected of losing even the Bitcoins they seized. The stark contrast between the two: while some public institutions choose to collaborate with professional custodians and establish audits and multi-signature authorizations, others remain at the amateur level of "just get the coins first."

● Meanwhile, on-chain assets themselves are rapidly expanding in form. Research briefs indicate that a certain entity recently purchased 4,300 gold tokens XAUT in one go, valued at approximately 21.71 million USD, effectively bringing a large amount of physical gold onto the blockchain in token form; while the news that VanEck's Avalanche spot ETF is about to be launched represents traditional financial products attempting to access new public chain ecosystems in ETF form, although the specific date has yet to be disclosed.

● As global capital accelerates the "asset on-chain" process through pension funds, gold tokens, and public chain ETFs, some regulatory agencies on the other side have yet to even master the most basic custodial work. This misalignment brings not only efficiency gaps but also a generational gap in governance logic. The "cloud of lost coins" in Gwangju appears as a clear scar left when an old system collides with a new asset world.

From Never Receiving Custody: How the Government Can Catch Up on Cryptocurrency Asset "Homework"

● The real issue exposed by this incident is a premise that all sovereign institutions will eventually have to face: to confiscate, manage, and dispose of cryptocurrency assets, the prerequisite is to first learn to manage private keys like professional custodians. If they continue to rely on the traditional mindset of "handing it over to a certain unit for safekeeping" without understanding that the key is the essence of the asset, then any compliance, judgment, and tax arrangements may ultimately become empty talk.

● On feasible paths, there are indeed mature experiences to draw from. Multi-signature solutions can reduce the risks of single-point failures and internal malfeasance by decentralizing permissions, and introducing qualified third-party custodians can establish professional-grade cold storage and disaster recovery systems within a compliance framework, combined with independent audits and on-chain tracking to create more transparent asset reports. Of course, we do not need to provide specific technical architectures here; it is enough to clarify one point: technology and systems must be upgraded in tandem.

● If this upgrade does not come soon, incidents such as "lost coins," "wrong transfers," "forgotten backups," and "private keys held by a single person" will continue to recur in the future. For law enforcement agencies, this is not just a financial loss but a continuous erosion of public trust: the public will question where confiscated assets went, taxpayers will ask whether the state has the ability to manage the on-chain wealth it controls, and the willingness to comply with tax and reporting will be diluted in distrust.

● Therefore, the controversy surrounding Bitcoin custody is not merely a simple technical upgrade but a complete restructuring of governance structures and boundaries of responsibility. Who signs, who approves, who is responsible for losses, and who has the right to audit—these questions must be redrawn in legal texts and operational processes. Without this framework, there can be no true "national-level custody capability."

Who Holds the Private Key, Who Holds the Narrative Power

The incident at the Gwangju District Prosecutor's Office, where seized Bitcoins are suspected to be lost, is far more than a management accident of a local agency; it resembles the first direct collision between sovereign institutions and cryptocurrency assets: the old power structure attempts to incorporate new assets into a traditional management framework but exposes a dual void in cognition and systems at the most critical "private key" stage.

On one side are traditional financial forces, including Colombian pension institutions, exposing parts of millions of clients' retirement funds to Bitcoin through fund products, professional custody, and audit processes; on the other side, some regulatory agencies repeatedly make mistakes in confiscating and managing cryptocurrency assets due to a lack of specialized custody and technical capabilities, even being questioned for "not being able to safeguard the coins."

The future cryptocurrency market is likely to shift from "only watching price fluctuations" to paying more attention to "who manages the assets" and "what systems are used to manage the assets." Whether it is managed by professional custodians under strict audits with multi-signatures or controlled by departments lacking technical capabilities; whether it is constrained by transparent on-chain reports or obscured by vague statements of "unable to confirm this matter," will directly affect the flow of capital and public trust in the rules.

In this sense, all debates will ultimately point to the same underlying proposition: whoever holds the private key, trust will follow them.

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