The Bank of Korea (BOK) has dismissed the possibility of establishing a strategic bitcoin reserve, citing concerns over price volatility and risks. This comes despite ongoing global discussions about using bitcoin as part of foreign exchange reserves following the United States plans to create a reserve.
In response to an inquiry from a member of the National Assembly’s Strategy and Finance Committee, the central bank rejected adding bitcoin to its reserves. BOK officials emphasized bitcoin’s wild price swings as a key deterrent, stating that transaction costs to convert bitcoin to cash “could rise drastically” if the market experiences instability.
As of March 17th, bitcoin trades around $83,500, having fallen 23% from its peak of $108,000 in January. The BOK warned that this extreme volatility poses significant risks to its reserves.
The bank also indicated that bitcoin fails to meet the International Monetary Fund’s (IMF) criteria for reserve assets. The IMF calls for prudent management of liquidity, market, and credit risks for reserves – standards bitcoin does not currently satisfy in the eyes of the BOK.
This latest stance marks the first time the South Korean central bank has directly addressed the possibility of using bitcoin as a reserve asset. It emphasized a “cautious approach” regarding bitcoin.
The dismissal of a strategic bitcoin reserve comes despite growing attention on crypto’s potential role in reserves globally. Earlier in March, U.S. President Donald Trump signed an executive order to establish a strategic bitcoin reserve. This fueled discussions in South Korea and other Asian nations about following suit.
