The “Physical Object” Defense Is Dead
South Korea’s Supreme Court has ruled that cryptocurrencies held on centralized exchanges are subject to seizure in criminal investigations, dismantling the long-standing defense that digital assets are “intangible” and thus confiscation-proof. The decision, delivered on December 11, 2025, and made public this week, establishes a definitive legal precedent: exchange-custodied crypto is not merely data. It is property with realized economic value.
The market shrugged off the regulatory tightening. Bitcoin (BTC) hovered near $91,000 (-0.5% in 24h) during Friday’s Asian session, continuing its consolidation ~28% below the October 2025 all-time high. Traders appear to have priced in the inevitable closing of this legal loophole.
The 55.6 BTC Precedent
The ruling stems from the appeal of “Mr. A,” a defendant in a money laundering probe whose 55.6 BTC was seized by police in 2020. At the time of seizure, the stash was worth approximately 600 million won ($413,000). Today, that same stack would be valued at over $5 million.
Mr. A’s legal team attempted to leverage Article 106 of the Criminal Procedure Act, arguing that seizure warrants only apply to “physical objects.” Since Bitcoin exists solely as electronic data on a ledger, they claimed it fell outside the statute’s reach. The Supreme Court rejected this outright.
“Bitcoin is an electronic token with the ability to be independently managed, traded, and substantially controlled in terms of economic value. It is a seizure target of courts or investigative agencies.”
Institutional Impact
This decision effectively ends the ambiguity for South Korea’s major exchanges, including Upbit and Bithumb. While previous rulings in 2018 and 2021 recognized crypto as a “property interest” for damages or tax purposes, this specific judgment targets the custodial layer. Exchanges are now legally compelled to treat user balances as seizable assets, equivalent to a bank account under a freeze order.
Compliance costs will likely rise. Domestic platforms, already operating under strict KYC mandates, must now integrate rapid-response seizure protocols directly into their custodial infrastructure to comply with warrant executions.
