- Bank of Korea confirms Bitcoin will not be added to foreign reserves due to volatility and potential cost surges in unstable conditions.
- The central bank’s decision reflects IMF guidelines requiring liquidity and stability in reserve assets, which Bitcoin fails to meet.
- South Korea loosens crypto trading rules but separates monetary policy from volatile digital assets like Bitcoin.
South Korea’s central bank has officially ruled out adding Bitcoin to its foreign exchange reserves. The Bank of Korea released a statement on March 16 confirming it does not plan to treat the digital asset as part of its national holdings.
The Bank of Korea made its statement after Rep. Cha Gyu-geun from the National Assembly Planning and Finance Committee filed an inquiry. The Bank of Korea expressed its opposition to Bitcoin reserves because of its extreme and repetitive market fluctuations.
The central bank highlighted that Bitcoin may face major value declines during market instability. Hence, it may trigger elevated transaction costs during liquidation. These risks, the bank noted, make Bitcoin a poor fit for assets intended to stabilize the economy.
IMF Standards Guide Policy Decisions
The Bank of Korea stated its stance aligns with the International Monetary Fund’s guidelines. Reserve assets, according to the IMF, must be liquid, marketable, and carry an investment-grade rating. The central bank explained that Bitcoin fails to meet these key standards.
According to the bank, Bitcoin lacks the liquidity required in volatile markets. Additionally, its unstable performance poses a significant risk during emergencies or economic shocks, making it unsuitable as a secure asset in reserve holdings.
Policy Shift Despite Regulatory Easing
The Bank of Korea’s decision stands in contrast to South Korea’s broader regulatory trend. The country is currently moving to ease rules surrounding cryptocurrency. Plans are underway to allow institutional crypto trading after a ban remained in place for years.
Globally, central banks remain divided on Bitcoin’s role in reserve management. Nations like the Czech Republic and Brazil have shown interest in evaluating digital assets. Japan together with Switzerland and the EU maintain Bitcoin remains an unsafe asset yet they continue to embrace it.
The United States has taken a different stance from South Korea by adding Bitcoin to the newly announced Strategic Bitcoin Reserve. The strategic Bitcoin reserve holds digital assets that federal government authorities have seized through the power granted in their March executive order.
