Bank of Korea to take ‘cautious approach’ to Bitcoin reserve
The Bank of Korea is currently adopting a "cautious approach" towards the potential inclusion of Bitcoin (BTC) as a foreign exchange reserve. In a response dated March 16 to a written inquiry from Representative Cha Gyu-geun, a member of the National Assembly’s Planning and Finance Committee, central bank officials stated that Bitcoin has not been thoroughly evaluated for such a role, primarily due to its significant price volatility.
The central bank pointed out, “Bitcoin’s price volatility is very high,” adding that any instability in the cryptocurrency market could lead to drastically increased transaction costs when attempting to liquidate Bitcoin holdings. Over the past month, Bitcoin’s price has fluctuated dramatically, ranging between $98,000 and $76,000, before recently stabilizing around $83,000—representing a 15% decline since mid-February, according to data from CoinGecko.
This stance comes amid a broader international discourse on the integration of crypto assets into national financial strategies. Recently, US President Donald Trump issued an executive order establishing a strategic Bitcoin reserve and a digital asset stockpile, igniting conversations globally about the viability of cryptocurrencies as official reserves.
During a seminar on March 6, various crypto industry advocates and members of Korea’s Democratic Party expressed a desire for the country to consider incorporating Bitcoin into its national reserves and to develop a stablecoin backed by the Korean won. However, the Bank of Korea reiterated its criteria for foreign exchange reserves, highlighting the need for assets to possess liquidity and immediate usability, along with a credit rating of investment grade or higher—conditions that Bitcoin presently fails to meet.
Academics have also weighed in on this issue. Professor Yang Jun-seok from the Catholic University of Korea mentioned that foreign exchange reserves should ideally align with the currencies of trading partners. Professor Kang Tae-soo from KAIST’s Graduate School of Finance remarked on the United States’ potential preference for stablecoins over Bitcoin to secure dollar dominance, suggesting that recognition of stablecoins as foreign exchange reserves by the International Monetary Fund (IMF) could be significant moving forward.
Earlier in the month, South Korea’s financial regulator examined the ongoing legislative trends in Japan regarding crypto assets, particularly considering lifting a ban on cryptocurrency exchange-traded funds (ETFs) in the nation.
In this context, the discourse around Bitcoin’s inclusion as a reserve asset remains contentious, reflecting the ongoing challenges and opportunities within the evolving landscape of digital currencies on a global scale.
