Bank of Korea’s Stance on Bitcoin and Foreign Exchange Reserves

Bank of Korea Rejects Bitcoin for Foreign Exchange Reserves

Bank of Korea– The Bank of Korea (BOK) has firmly stated that it has no plans to include Bitcoin in its foreign exchange reserves, citing concerns over the cryptocurrency’s high volatility. This response came in reaction to an inquiry from a member of the National Assembly’s Strategy and Finance Committee.

The central bank highlighted Bitcoin’s price swings as a key reason for its decision. According to the Korea Economic Daily, BOK fears that the cryptocurrency’s volatility could result in high transaction costs when converting Bitcoin to cash. Given this unpredictability, the bank is cautious about incorporating Bitcoin into its foreign exchange reserves.

The BOK also noted that Bitcoin does not align with the International Monetary Fund’s (IMF) guidelines for managing foreign exchange reserves. These guidelines stress the importance of liquidity control and risk management. The IMF mandates that foreign exchange reserves should manage market and credit risks “prudently,” something Bitcoin struggles to meet due to its inherent volatility.

Global Reactions and Trump’s Executive Order

The debate over Bitcoin reserves has gained international attention, especially after U.S. President Donald Trump signed an executive order in early March to establish a Strategic Bitcoin Reserve. This initiative was based on Bitcoin seized from criminal cases and is part of a broader move by several countries to explore Bitcoin as a potential reserve asset. However, South Korea has expressed skepticism, echoing concerns raised by Japan, Switzerland, and the European Central Bank regarding Bitcoin’s stability.

While rejecting Bitcoin for reserves, South Korea has been easing its crypto regulations. The country’s financial watchdog is working on a plan to gradually lift the ban on institutional crypto trading. Additionally, South Korea is preparing its second legal framework for cryptocurrencies, which will focus on managing stablecoins.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.