Key insights
- Dunamu ranked first in both the overall evaluation and technical assessment.
- The custody contract covers seized cryptocurrencies for one year.
- Smaller custody providers questioned whether the requirements limited meaningful competition.
Upbit operator Dunamu has emerged as the preferred bidder to manage digital assets seized by South Korea’s National Police Agency. The selection marks an important step in the government’s effort to strengthen custody standards after previous incidents involving missing confiscated cryptocurrencies.
Procurement records published through South Korea’s Public Procurement Service showed Dunamu finishing first in the competitive tender. The company now enters final negotiations with the police agency. If both sides reach an agreement, Dunamu will receive the one-year contract without the need to negotiate with lower-ranked bidders.
Competition Highlights Questions Over Tender Requirements
The evaluation placed Dunamu comfortably ahead of rival custody providers. The company earned the highest possible score for its price offer while also leading the technical assessment.
The contract carries a value of 267 million won, or about $195,000, and will cover the custody and management of cryptocurrencies seized during criminal investigations over the next year.
| Bidder | Technical Score | Price Score | Total Score |
|---|---|---|---|
| Dunamu | 84.73 | 10.00 | 94.73 |
| Korea Digital Asset Custody | 81.29 | 10.00 | 91.29 |
| Hecto Wallet One | 77.27 | 10.00 | 87.27 |
However, the outcome triggered criticism from several industry participants. They argued that the bidding conditions favored a large exchange operator over independent custody firms.
The police agency required bidders to assume custody immediately after asset transfers. It also demanded continuous 24-hour operational support and full financial compensation if hackers compromised government-held assets.
Several custody providers said those standards reflected the government’s security priorities. However, they also argued that only large operators with extensive infrastructure could realistically satisfy every requirement.
One industry representative said smaller custody firms entered the competition with a significant disadvantage because matching the operational capacity of a major exchange proved extremely difficult.
Evaluation Process Sparks Industry Debate
Some companies also questioned how evaluators measured operational capability during the selection process.
Industry representatives acknowledged Dunamu’s experience running a large digital asset platform around the clock. They also recognized its history of managing numerous cryptocurrency assets. Even so, several participants argued that evaluators overlooked an important opportunity to inspect competing security systems directly.
According to local industry accounts, competing firms proposed on-site inspections that would have allowed officials to verify their custody infrastructure and cybersecurity controls. Those inspections never became part of the formal evaluation.
The National Police Agency rejected claims that the process favored a large company from the beginning. Officials maintained that the selection followed a fair and competitive procurement process based on published criteria.
The move also underscores the importance of the scale of operation for public-sector partnerships in the digital asset market in South Korea.
The stakes are raised in the wake of previous security incidents
The government’s move follows previous events that revealed flaws in the process of managing seized digital assets.
The authorities have stepped up their efforts on external custody solutions due to the disappearance of Bitcoin in assets seized by the Gwangju District Prosecutors’ Office, local reports said. Another Bitcoin that was seized, but went missing, was confirmed during a separate investigation in 2022, according to police.
Those incidents accelerated discussions about transferring custody responsibilities to specialized private institutions with stronger operational safeguards.
The latest development also arrives while Dunamu continues addressing regulatory matters outside the custody project. Earlier this month, the company postponed its planned all-stock share swap with Naver Financial for a second time. The transaction now targets completion by Dec. 31 because several regulatory approvals remain outstanding.
For Upbit, the preferred bidder status represents another high-profile government engagement despite broader regulatory scrutiny surrounding its parent company.
Broader Market Significance
The procurement result marks a national trend in South Korea’s cryptocurrency industry. To meet the expectations of government agencies, custody providers are required to prove institutional grade security, monitoring and financial responsibility.
Those standards may spur additional consolidation on the grounds that bigger ones have more money and technical power. Smaller custodians might need to build stronger relationships or more infrastructure to compete for public contracts in the future.
Meanwhile, regulators are under further pressure to ensure that the procurement process also meets both security needs and open competition. If these concerns are repeated in future tenders, it may lead to greater industry interest in government tenders.
The choice also enhances the visibility of the exchange outside of exchange service, enabling its parent company to become a government custodian over the sensitive digital assets.
Conclusion
Dunamu is still in the lead to win the contract for the South Korean police cryptocurrency custody, having won both the technical and overall evaluations. National Police Agency officials said the qualification process was legitimate, but other companies said it was rigged for larger companies.
In the event of a successful negotiation, Upbit’s parent will be responsible for the safekeeping of the cryptocurrencies seized for the next 12 months, which is another step in South Korea’s cryptocurrency custody framework.
