South Korea’s central bank has confirmed that it will not incorporate Bitcoin into its foreign exchange reserves.
On March 16, the Bank of Korea responded to inquiries from the National Assembly, clarifying that the addition of Bitcoin (BTC) to its reserves is not under consideration. This decision comes amid growing concerns regarding Bitcoin’s volatility, which the bank cited as a major risk factor, warning that “transaction costs to cash out Bitcoins could rise drastically” during market instability.
The central bank further explained that Bitcoin fails to meet the International Monetary Fund’s criteria for foreign exchange reserves. These criteria mandate that assets should maintain liquidity, market stability, and possess a credit rating of investment grade or higher.
International discussions about national cryptocurrency reserves have gained momentum, particularly after the U.S. government’s establishment of a Strategic Bitcoin Reserve. Countries such as Brazil and the Czech Republic have shown interest in exploring similar initiatives.
However, the Bank of Korea underscored the need for a “cautious approach.” It referenced the skepticism shared by major financial institutions, including the European Central Bank and the Swiss National Bank.
The bank has yet to review or formally discuss the potential of adding Bitcoin to its reserves.
Recent discussions within the Korean Democratic Party have suggested that the central bank should explore Bitcoin’s potential role in the financial system, as highlighted during a policy seminar on March 6.
Additionally, the Financial Services Commission has echoed a cautious stance. In November, FSC Chairman acknowledged interest in establishing a national Bitcoin reserve but deemed it premature at this time.
Despite these reservations, South Korea is gradually relaxing its crypto regulations. The financial watchdog is actively working to lift restrictions on institutional crypto trading and is developing a new legal framework focused on stablecoin regulation.
Furthermore, policymakers are evaluating the possibility of allowing cryptocurrency exchange-traded funds, which could introduce new opportunities for South Korea’s financial sector.
