Bank of Korea Dismisses Bitcoin as FX Reserve, Citing Volatility

South Korea’s central bank has expressed skepticism about adding Bitcoin to its foreign exchange reserves, citing concerns over extreme price volatility and liquidity risks.

In response to a parliamentary inquiry, officials from the Bank of Korea (BOK) stated they have not formally considered the possibility, emphasizing the need for a cautious approach.

The central bank highlighted Bitcoin’s price fluctuations, noting that transaction costs could surge in times of market instability, making it an unsuitable reserve asset. Over the past month, Bitcoin’s price has ranged between $98,000 and $76,000 before stabilizing around $83,000, reflecting a significant downturn from mid-February.

This stance comes as global discussions on integrating crypto into national reserves gain traction. The debate intensified after former U.S. President Donald Trump announced plans to establish a strategic Bitcoin reserve. In South Korea, crypto industry advocates and members of the Democratic Party have urged the government to explore a similar move, proposing the development of a stablecoin pegged to the Korean won.

However, BOK officials reiterated that foreign exchange reserves must be highly liquid and hold an investment-grade credit rating—criteria Bitcoin fails to meet. Echoing this sentiment, Professor Yang Jun-seok of the Catholic University of Korea argued that reserves should primarily consist of currencies tied to key trading partners. Meanwhile, KAIST finance professor Kang Tae-soo suggested that the U.S. is more likely to focus on stablecoins rather than Bitcoin to reinforce dollar dominance, raising questions about whether the International Monetary Fund (IMF) will eventually recognize stablecoins as reserve assets.

Meanwhile, South Korea’s financial regulators have been closely monitoring Japan’s evolving stance on crypto regulations, including the potential approval of crypto exchange-traded funds, as they consider revising their own policies.

Author

Alexander Stefanov

Reporter at CoinsPress

Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.