On March 17, 2025, the central bank of South Korea issued its first remarks regarding the potential inclusion of Bitcoin in its reserves. The bank clarified that it has no interest in acquiring Bitcoin and has never pursued such an option.
Why is South Korea not considering a Bitcoin reserve?
Earlier this month, members of South Korea’s Democratic Party urged the Bank of Korea to examine the feasibility of adding Bitcoin to its reserves, following a similar initiative by the United States government.
The response from the Bank of Korea was unequivocally negative. The primary reason for the bank’s disinterest in Bitcoin stems from its extreme volatility. As stated by a representative of the central bank, the price fluctuations of Bitcoin resemble a roller coaster. Given the likelihood of significant price drops, Bitcoin cannot ensure it will provide the expected value in Korean won at any time. Reserve assets should be both accessible and denominated in a currency with a strong credit rating, criteria that Bitcoin does not fulfill.
In addition to this reasoning, the Bank of Korea pointed to the hesitance of other nations to adopt Bitcoin as part of their national reserves. While Brazil and the Czech Republic have reported positive experiences in adding Bitcoin to their reserves, institutions like the European Central Bank and central banks in Switzerland and Japan have expressed reservations about utilizing Bitcoin as a reserve asset.
This indicates that despite ongoing discussions about a global competition in cryptocurrency, many countries are adopting a cautious approach towards Bitcoin and do not seem eager to join the ranks of the U.S. and other nations that have accumulated Bitcoin. The leaders of these countries do not appear concerned about missing out on opportunities related to Bitcoin.
Cryptocurrency in South Korea
South Korea stands out as one of the largest economies globally and a welcoming environment for cryptocurrency. Crypto exchanges operate legally and are regulated within the country. However, cryptocurrencies are not recognized as conventional money, and capital gains from crypto transactions are exempt from taxation.
In an economic climate marked by political uncertainty and high unemployment, South Korea’s youth are increasingly turning to cryptocurrencies as a means of achieving financial independence.
Moreover, the public’s long-standing familiarity with microtransactions, especially within social media and gaming, has cultivated a positive atmosphere for cryptocurrency adoption. According to a 2021 survey, nearly 50% of South Koreans in their 30s are engaged in crypto investments.
Furthermore, South Korea boasts several dynamic crypto platforms, such as Upbit, Bithumb, and HTX.
Thus, the decision to forgo Bitcoin as a reserve asset should not be seen as an anti-crypto stance, but rather as a prudent strategy from a generally crypto-accepting government.
Why are other countries resistant to the idea of a Bitcoin reserve?
The governor of the Czech National Bank proposed investing significantly in Bitcoin to diversify reserves, but European Central Bank President Christine Lagarde countered this, emphasizing that Bitcoin lacks the requisite safety and liquidity for inclusion in the ECB reserves.
Japan similarly dismissed Bitcoin, stating it does not align with their national reserve strategy, citing price volatility and incompatibility with current financial systems. The Swiss National Bank echoed similar concerns; its president, Martin Schlegel, labeled cryptocurrency as a “niche phenomenon,” citing high volatility and low liquidity as factors hindering Bitcoin’s acceptance as a reserve asset.
Proponents of cryptocurrency argue that officials in these nations may simply lack an understanding of Bitcoin and the transformative potential its inclusion in national treasuries could hold.
Australia’s Reserve Bank governor Michele Bullock serves as an example of such officials. In November 2024, she expressed her lack of comprehension regarding Bitcoin and dismissed its relevance in the Australian economy and payment system.
Others in the crypto community suggest that countries like South Korea are currently avoiding Bitcoin at an inopportune time. One commentator suggested that “betting against Bitcoin in 2025 is akin to shorting the internet in 2000.”
Interestingly, the long-awaited establishment of a U.S. Strategic Bitcoin Reserve has not fueled the crypto market nor triggered a global chain reaction. While the arguments presented by prominent figures on the necessity for any leading nation to accumulate Bitcoin are compelling to some, many traditional central banking officials worldwide remain unconvinced, adhering to strict criteria for reserve assets that Bitcoin does not satisfy. They often overlook Bitcoin’s unique traits.
This approach positions the U.S. government and other Bitcoin-inclined nations as risk-takers. Only time will reveal which strategy proves to be the most prudent.