- South Korea’s central bank has ruled out Bitcoin as a foreign exchange reserve due to its high volatility and failure to meet IMF liquidity and credit standards.
- While global discussions on crypto reserves continue, South Korea and Japan remain cautious, contrasting with the U.S.’s recent push to establish a strategic crypto reserve.
The Bank of Korea (BOK) has officially ruled out the inclusion of Bitcoin in its foreign exchange reserves, citing concerns over its extreme price volatility and failure to meet international financial standards. This marks the first time South Korea’s central bank has explicitly stated its position on Bitcoin as a national reserve asset, highlighting a cautious stance amid increasing global discussions on crypto reserves.
Why Bitcoin Won’t Make the Cut
The BOK’s decision follows a formal inquiry from Representative Cha Gyu-geun of the National Assembly’s Planning and Finance Committee. The central bank’s response emphasized that Bitcoin’s rapid price fluctuations pose a significant risk, making it unreliable for reserve holdings.
Bitcoin’s volatility is evident in its recent market performance. Currently trading at approximately $83,450, the cryptocurrency has seen a significant 23% drop from its all-time high of $109,000 in January. This instability raises concerns about the cost and feasibility of converting Bitcoin into cash during times of financial distress.
Beyond volatility, Bitcoin fails to meet the International Monetary Fund’s (IMF) foreign exchange reserve criteria. According to the BOK, the IMF requires reserve assets to be liquid, marketable, and denominated in investment-grade currencies—standards Bitcoin does not fulfill.
The Global Context: A Divided Crypto Landscape
The rejection of Bitcoin as a reserve asset in South Korea contrasts with recent moves by other global players. In the United States, President Donald Trump recently signed an executive order to establish a strategic “crypto reserve,” incorporating Bitcoin and Ethereum as part of the nation’s financial strategy.
In Asia, South Korea’s stance mirrors that of Japan, where Prime Minister Shigeru Ishiba recently expressed concerns about the lack of transparency surrounding the U.S. and other nations’ plans for Bitcoin reserves. This came after Japanese lawmaker Satoshi Hamada proposed exploring Bitcoin as a potential reserve asset.
Despite these discussions, Japan and South Korea remain hesitant, reflecting a broader skepticism in Asia about integrating cryptocurrencies into traditional financial systems.
A Cautious Path Forward
While South Korea remains open to crypto innovation, the BOK’s stance signals a measured approach to digital assets. This decision aligns with its broader financial stability goals, ensuring that reserve assets remain secure and reliable. As global conversations around crypto reserves continue, South Korea’s decision underscores the ongoing debate about the role of digital currencies in national financial systems.
