Key Points
- South Korea’s central bank has no intention of incorporating Bitcoin into its foreign exchange reserves.
- This decision is due to Bitcoin’s high volatility and failure to meet the International Monetary Fund’s criteria for foreign exchange reserves.
South Korea’s central bank has declared that it has no intentions of including Bitcoin in its foreign exchange reserves. This announcement was reported by local media outlet Yonhap on Mar. 16, following an inquiry from Representative Cha Gyu-geun of the National Assembly’s Planning and Finance Committee.
The bank stated that Bitcoin’s high volatility is a major concern, warning of potential drastic increases in transaction costs if the crypto market becomes unstable. Furthermore, officials noted that Bitcoin fails to meet the International Monetary Fund’s standards for foreign exchange reserves, which necessitate assets to have liquidity, market stability, and a credit rating of investment grade or higher.
Global Discussion on Crypto Reserves
The topic of national crypto reserves has been gaining momentum worldwide, especially after the U.S. government’s decision to establish a Strategic Bitcoin Reserve. Countries like Brazil and the Czech Republic have expressed interest in the concept. However, the Bank of Korea remains cautious, noting that other institutions such as the European Central Bank, the Swiss National Bank, and Japan’s financial authorities also maintain a skeptical stance.
The bank clarified that it has not reviewed or formally discussed the potential of including Bitcoin in its reserves. According to Yonhap, some members of the Korean Democratic Party urged the bank in a March 6 policy seminar to explore Bitcoin’s potential role in the country’s financial system.
Gradual Loosening of Crypto Regulations
Despite the central bank’s stance, South Korea has been progressively easing its crypto regulations. The country’s financial watchdog is working on removing restrictions on institutional crypto trading and is preparing a second legal framework focused on stablecoin oversight. Policymakers are also contemplating the allowance of crypto exchange-traded funds, which, according to the chairman of the Korea Exchange, could introduce new opportunities to the country’s financial sector.
