No Strategic Bitcoin Reserve in South Korea: Report
The Bank of Korea has definitively stated its position regarding the inclusion of Bitcoin (BTC) in the nation’s foreign exchange reserves, expressing a clear reluctance to adopt a strategic bitcoin reserve policy. This stance was articulated in a recent inquiry response from the central bank to Representative Cha Gyu-Geun, a member of the Democratic Party of Korea. The inquiry highlighted the challenges posed by Bitcoin’s inherent volatility and its non-compliance with International Monetary Fund (IMF) standards for reserve assets.
Recent price fluctuations of Bitcoin illustrate the asset’s volatility, with its value dramatically dropping from a peak of $109,000 to a recent low of $76,700, landing at approximately $83,500 as of the latest data from CoinMarketCap. The Bank of Korea cautioned that such instability could lead to significant transaction costs when converting Bitcoin back to traditional currencies and potential losses from future sales.
The bank’s skepticism about Bitcoin extends beyond its price fluctuations. It pointed out that BTC does not meet the stringent criteria set by the IMF for inclusion in foreign exchange reserves. These criteria emphasize the need for reserves to be readily available, possess a qualified investment-grade credit rating, and exhibit considerable liquidity and marketability. Given these factors, the Bank of Korea maintains that Bitcoin is not a suitable candidate for its reserves.
Moreover, the central bank’s reservations come amidst a broader conversation on cryptocurrency reserves, particularly as various nations explore or implement policies regarding digital assets. While countries like the Czech Republic and Brazil have expressed interest in adopting Bitcoin into their reserves, major institutions such as the European Central Bank (ECB) and the Japanese government have voiced their concerns, aligning more with South Korea’s cautious approach.
Calls for the establishment of a Bitcoin reserve in South Korea have been made by financial experts and lawmakers, especially in light of recent movements by the U.S. government to create a digital asset stockpile. However, for now, the Bank of Korea remains steadfast in its decision to exclude Bitcoin from its strategic financial planning.
