The central bank of South Korea is adopting a “cautious approach” regarding the possible inclusion of Bitcoin in its foreign exchange reserves.
In a response to a written inquiry on March 16, bank officials noted they have yet to explore the idea of holding Bitcoin (BTC) as a reserve asset, attributing this hesitance to its significant price volatility.
In reply to a query from a member of the National Assembly’s Planning and Finance Committee, representatives of the bank indicated that they have “not engaged in discussions nor reviewed the potential addition of Bitcoin to foreign exchange reserves,” emphasizing that “a careful strategy is essential,” as reported.
The bank remarked on the “extreme price fluctuations” of Bitcoin, adding that “during times of instability in the cryptocurrency market, the costs associated with converting Bitcoin to cash could increase significantly.”
In the last month, Bitcoin’s value has dramatically fluctuated between $98,000 and $76,000, currently stabilizing around $83,000, reflecting a 15% decrease since February 16, according to CoinGecko.
This decision comes amid a rise in global discussions about the role of cryptocurrency in national financial policies, heightened by an executive order from former US President Donald Trump earlier this month to create a strategic reserve for Bitcoin and other digital assets.
During a seminar on March 6, advocates from the cryptocurrency sector and some members of Korea’s Democratic Party encouraged the nation to consider incorporating Bitcoin into its reserves and to create a stablecoin backed by the won.
However, the Bank of Korea maintained that its foreign exchange reserves must possess liquidity and be immediately available, as well as having a credit rating classified as investment grade or higher—criteria that it believes Bitcoin fails to satisfy.
Professor Yang Jun-seok from the Catholic University of Korea agreed, suggesting that “it is suitable for foreign reserves to be held relative to the currencies of our trading partners.”
Professor Kang Tae-soo from the KAIST Graduate School of Finance remarked that the US is likely to utilize stablecoins rather than Bitcoin to sustain the dominance of the dollar, also noting that “it will be crucial to see if the IMF recognizes stablecoins as valid foreign exchange reserves in the future.”
Related: Democratic representative calls on Treasury to halt Trump’s Bitcoin reserve initiatives
Earlier this month, South Korea’s financial oversight body took note of the Japanese Financial Services Agency’s legislative movements regarding crypto assets while considering lifting a ban on cryptocurrency exchange-traded funds in the nation.
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