The Bank of Korea Announced on March 16 That It Is Not Considering the Inclusion of Bitcoin

The Bank of Korea announced on March 16 that it is not considering the inclusion of Bitcoin in its foreign exchange reserves.

The Bank of Korea has no plans to include Bitcoin in its foreign exchange reserves, the institution said in response to a written inquiry from Rep. Cha Gyu-geun of the National Assembly’s Planning and Finance Committee on March 16.

The central bank’s response marks the first time it has publicly expressed its position on the possibility of adding Bitcoin to its reserves, which has been a topic of debate recently following U.S. President Donald Trump’s March 6 executive order directing the strategic stockpiling of Bitcoin as part of his administration’s broader efforts to mitigate the threat of the Chinese yuan.

The Bank of Korea pointed to high price volatility and non-compliance with foreign exchange reserve criteria among the main reasons for its decision.

“Bitcoin’s price volatility is very high, and transaction costs could increase sharply during the liquidation process if virtual assets become unstable,” the bank explained.

The minimum unit of trading for Bitcoin is 0.001, and at the recent price of 110 million won, the transaction cost would be at least 110,000 won, the Bank of Korea said. In comparison, the transaction cost for U.S. Treasury bonds with a minimum trading unit of $1,000 and a price of $100,000 is 0.1%, or 100,000 x 0.001 = $100.

The price of Bitcoin has fluctuated significantly in recent months, ranging from 160 million won in January to 110 million won, varying with market trends and the macroeconomic environment.

“Foreign exchange reserves must be immediately usable when needed and thus possess liquidity and marketability,” the Bank of Korea added. “The currencies used for foreign exchange reserves should also be convertible and generally have a credit rating of investment grade or higher, but Bitcoin does not satisfy these conditions.”

The European Central Bank, Swiss National Bank and the Japanese government have also expressed skepticism about including Bitcoin in their foreign exchange reserves, aligning with the Bank of Korea’s cautious approach.

“It is appropriate for foreign exchange to be held in proportion to the currencies of countries with which we trade,” said Prof. Yang Jun-seok of Catholic University of Korea. “For instance, since most of Korea’s trade is with China, it would be logical to hold a larger proportion of the yuan and a smaller proportion of the dollar.”

However, Prof. Yang noted that major countries do not issue bonds in Bitcoin, which might limit the advantages of holding virtual assets.

“If a country's bonds are not included in the foreign exchange reserves of other countries, it can become difficult to manage macroeconomic instability or to intervene in the exchange market to stabilize the currency value during a crisis,” the Bank of Korea said.

The central bank's decision not to include Bitcoin in its reserves also considers the implications for the International Monetary Fund (IMF), which recognizes foreign exchange reserves according to the standards of the major central banks.

“As the U.S. is likely to leverage stablecoins rather than Bitcoin to maintain dollar hegemony, whether the IMF will recognize stablecoins as foreign exchange reserves in the future is important,” said Prof. Kang Tae-soo from KAIST Graduate School of Finance.

This perspective highlights the broader geopolitical and economic strategies related to currency dominance and the evolving role of digital currencies in global finance.