David Edwards
Citing significant volatility and liquidity concerns, the Bank of Korea (BOK) has announced that it is approaching the addition of Bitcoin (BTC) to its foreign exchange reserves cautiously.
Central bank officials stated in response to a question posed by Representative Cha Gyu-geun of the National Assembly that they had not examined or talked about the idea of keeping Bitcoin as part of South Korea’s reserve assets.
“Bitcoin’s price volatility is very high. In the case of cryptocurrency market instability, transaction costs to cash out Bitcoins could rise drastically.”
— Bank of Korea statement
The decision was made at a period of notable volatility in the price of Bitcoin, which, according to CoinGecko, has dropped 15% since February 16 and fluctuated between $98,000 and $76,000 over the past month before leveling off at $83,000.
Global Discussion on Crypto Reserves Picks Up Steam
The BOK’s cautious approach runs counter to the expanding global dialogue over the place of cryptocurrency assets in national financial plans. U.S. President Donald Trump sparked discussions among international politicians earlier this month when he issued an executive order creating a strategic Bitcoin reserve and a digital asset stockpile.
At a finance symposium in South Korea on March 6, proponents of the cryptocurrency business and Democratic Party members demanded that Bitcoin be included in national reserves and that a won-backed stablecoin be created.
The BOK did, however, restate that foreign exchange reserves ought to have:
- high liquidity, which guarantees that resources can be used right away as required.
- Bitcoin does not now match the threshold of investment-grade credit ratings.
This position was endorsed by Professor Yang Jun-seok of the Catholic University of Korea, who said:
“It is appropriate for foreign exchange to be held in proportion to the currencies of countries with which we trade.”
In the meantime, KAIST Graduate School of Finance Professor Kang Tae-soo proposed that the US is more likely to use stablecoins to uphold the dollar’s hegemony, saying:
“Whether the IMF will recognize stablecoins as foreign exchange reserves in the future is important.”
Regulatory Advancements and Prospects
Potential regulatory changes in South Korea may have been hinted at earlier this month when the country’s financial authority examined Japan’s Financial Services Agency’s changing position on crypto asset rules. According to reports, authorities are thinking of removing a restriction on cryptocurrency exchange-traded funds (ETFs), which might have an effect on the regulatory environment surrounding Bitcoin in the nation.
Although South Korea continues to exercise caution, the increasing awareness of digital assets around the world raises the possibility that central banks may eventually have to adjust to a shifting financial landscape.
