The Bank of Korea (BOK) is taking a “cautious approach” to incorporate Bitcoin into its foreign exchange reserve potentially.
Officials from the apex bank stated Sunday that they have never considered the option of creating a Bitcoin reserve, citing its notorious price instability as the reason for their decision not to review.
Bank of Korea Skeptical Of Bitcoin Reserve
According to the Bank of Korea, Bitcoin does not meet the standards for inclusion in its foreign exchange reserves, the Korea Economic Daily reported.
In response to a March. 16 written inquiry from Representative Cha Gyu-geun of the National Assembly’s Planning and Finance Committee, the BOK stressed the need for caution when considering Bitcoin as part of the nation’s financial assets.
The central bankers expressed concern that the wild swings in the crypto market could substantially increase transaction costs when converting Bitcoin to cash, subsequently posing a huge risk to its reserves.
The price of Bitcoin has see-sawed between $98,000 and $77,000 in the last 30 days, before settling at current levels of around $83K in a 23% decline from its peak of $109,000 in January, CoinGecko data shows.
BOK’s decision comes amid growing global discussions on the potential role of Bitcoin in national financial strategies, sparked by United States President Donald Trump. On March 6, President Trump signed an executive order to create a Strategic Bitcoin Reserve and digital asset stockpile, which will contain seized digital assets.
Earlier this month, South Korean crypto industry experts and some members of Korea’s Democratic Party — the country’s main centrist-liberal party — urged the government to incorporate Bitcoin into its national reserves and create a won-backed stablecoin.
While Trump’s EO pushed multiple countries to positively consider establishing their own BTC reserves, the South Korean central bank remains skeptical of the idea.
The Bank of Korea also argued that Bitcoin does not meet the International Monetary Fund’s criteria for foreign exchange reserves. According to this criteria, a foreign exchange reserve must prudently manage liquidity, market, and credit risks — requirements that Bitcoin does not fulfill, the bank stated.
South Korea Continues Crypto Regulation Amid Political Woes
South Korea, where more than 30% of its citizens are crypto holders, has witnessed political upheaval after ex-president Yoon Suk Yeol was apprehended earlier this year following an attempt to impose martial law in the nation.
Since then, the South Korean government has continued its crypto regulation efforts. The country is in talks to develop the second part of its crypto regulatory framework and seeks to draft the legislation within the second half of this year.
Moreover, South Korea’s financial watchdog recently revealed that it plans to issue crypto investment guidelines in the third quarter to reverse the de facto ban on institutional crypto investment. The regulator announced last month that it would soon allow charities and universities to sell their crypto holdings in the second quarter.
