Dunamu leads seven-firm race for South Korea police crypto custody

Dunamu, the operator of the Upbit exchange, is the frontrunner in a seven-way contest to become the official custodian of seized Bitcoin and other cryptocurrencies for South Korea’s National Police Agency. The contract, valued at 267 million won ($179,000), is the police’s fourth attempt this year to outsource custody of confiscated digital assets after three earlier rounds failed.

The first posting attracted zero bidders. The second received a single applicant, which failed because the procurement rules require competitive tenders. The third round ended when no firm cleared the 85-point technical evaluation threshold. To improve the odds, the police raised the budget more than threefold from the original 83 million won.

A police spokesperson told Seoul Economic Daily the higher budget was “intended to improve the profitability for participating bidders and encourage participation by private firms such as large cryptocurrency exchanges.” Even so, the contract carries a requirement that smaller custody firms still find prohibitive: the winning bidder must accept 100% financial liability for any asset losses, including those caused by hacking or events beyond the operator’s control. Pure-play custody providers and smaller exchanges lack the insurance coverage or balance sheet to back that guarantee.

Seven bidders have submitted proposals: Dunamu, Korea Digital Asset Custody (KDAC), Korea Digital Asset (KODA), BDACS, Hecto Wallet One, Infinit Block, and DSRV. KDAC formed a consortium with exchange Korbit, taking advantage of a contract provision that allows joint ventures of up to five members with minimum 10% stakes.

“There is talk that this bid announcement is effectively aimed at Upbit, and it is true that this is discouraging,” one custody industry official told Seoul Economic Daily. The police agency responded that “an operator will be selected through fair competition” under procurement law.

The urgency behind outsourcing custody stems from a string of embarrassing losses. In January, roughly 320 Bitcoins worth about $48 million went missing from the Gwangju District Prosecutors’ Office during a routine inspection. Weeks later, Gangnam District police disclosed the loss of 22 Bitcoins valued at around $1.5 million from assets seized in 2021. Both incidents involved USB-based wallets and failures to secure private keys.

Over the past five years, South Korean police have seized an estimated 54.5 billion won (approximately $36.5 million) in cryptocurrency, mostly in Bitcoin (BTC) and Ethereum (ETH). The growing volume of confiscated assets has made the lack of professional custody infrastructure a pressing operational gap. A custody industry source told Daehan Kyungje that, based on previous government procurement timelines, the winning bidder could be announced within a few weeks. BDACS, one of the bidders, claims a 26% share of South Korea’s institutional custody market by assets under management.