South Korea's Supreme Court has published draft civil enforcement rules outlining how digital assets can be seized and converted into cash during debt collection proceedings. According to local media reports, the Supreme Court published draft amendments to the Rules on Civil Execution on July 2, introducing formal procedures for enforcing claims against digital assets. The measures are scheduled to take effect on October 1 after public consultation, with public comments being accepted until August 11 before finalization.
Under the proposed rules, compulsory execution against a right to demand transfer of digital assets would begin once a court issues a seizure order. Digital asset exchanges and third parties holding the assets would be prohibited from transferring them to the debtor, while debtors themselves would be barred from disposing of their transfer rights or receiving the assets. Creditors would be allowed to ask courts to require exchanges or third parties to disclose whether transfer claims exist, the type and quantity of digital assets held, and whether other creditors or priority claims are attached to those assets.
Separate procedures have been proposed for compulsory execution against digital assets themselves rather than transfer claims. Once a court issues a seizure order, debtors would be prohibited from disposing of the assets, which would instead be transferred to an enforcement officer. The seizure would take legal effect once the transfer is completed. For liquidation, the draft provides for transfer orders or sale orders, with digital assets being transferred directly to the creditor's designated address after a transfer order becomes final.
The proposal explains how seized transfer claims could be converted into cash through transfer orders or court-approved sales. Under the sale process, enforcement officers could instruct virtual asset service providers to sell the assets, transfer them to an account opened for enforcement purposes before selling them, or exchange illiquid digital assets for more easily tradable ones before liquidation. The rules allow such exchanges when a token has low market value or limited trading liquidity. The Supreme Court's National Court Administration plans to complete the consultation process by August 11 before implementing the revised rules on October 1.
The proposal follows several digital asset policy changes introduced in South Korea in recent weeks. According to reports, last month the Financial Services Commission expanded cryptocurrency disclosure requirements for applicants seeking debt relief under the New Start Fund by requiring virtual asset holdings to be included in asset reviews. The commission has also proposed allowing digital asset laws to be covered under the country's financial regulatory sandbox as authorities continue updating the legal framework governing cryptocurrencies.
