Bank of Korea (BOK) Officially Excludes Bitcoin (BTC) as a Foreign Exchange Reserve Asset

The Bank of Korea (BOK) has officially excluded Bitcoin (BTC) as a foreign exchange reserve asset due to the high volatility and liquidity issues of the cryptocurrency.

The Bank of Korea (BOK) has excluded Bitcoin (BTC) as a foreign exchange reserve asset due to the cryptocurrency's high volatility and liquidity issues, confirming a report by Korea Economic TV.

As discussions on digital asset reserves grow globally, and reports indicate that the United States and other countries are considering Bitcoin reserves, the move comes amid growing political pressure on the BOK to diversify its reserves.

Following a question from lawmaker Cha Gyu-geum, the BOK confirmed that it had neither discussed nor deliberated on Bitcoin as part of its reserves. The central bank further noted that the glaring issues of price volatility and high service fees when selling in a declining market render Bitcoin an unreliable instrument.

The BOK also mentioned the International Monetary Fund's (IMF) guidelines, which mandate reserve assets to be highly liquid, have stable value, and carry strong credit ratings, all of which Bitcoin fails to fulfill.

While political intrigue surrounding cryptocurrency reserves is increasing, the BOK remains a holdout. Some South Korean politicians, especially of the Democratic Party, have advocated for a Bitcoin reserve at a national level. Crypto business people have also proposed stablecoin-backed reserves as a new financial approach.

However, the central bank again emphasized that reserves need to be available instantly for financial stability. The BOK president, in a prior statement, had expressed openness to discussing stablecoins but not Bitcoin.

Catholic University of Korea Professor Yang Jun-seok remarked on the limited scope of Bitcoin's asset class in the reserve market. He noted that the asset's role is minimal if major economies do not issue Bitcoin-denominated bonds for global use.

"The Bank of Korea has no plans to include Bitcoin in its foreign exchange reserves," a BOK spokesperson responded.

Internationally, South Korea's conservative approach aligns with other financial regulators. The European Central Bank, the Swiss National Bank, and the Japanese government have also expressed skepticism about accepting Bitcoin as a reserve currency.

Conversely, the United States, during Donald Trump's administration, made moves towards national reserves of Bitcoin, generating interest in its potential for international finance. Brazil and the Czech Republic are also contemplating their reserves in Bitcoins, highlighting a deepening division in economic policies between countries.

KAIST Graduate School of Finance Professor Kang Tae-soo suggests that stablecoins could be a more practical substitute for South Korea. He believes the United States would be more likely to employ stablecoins than Bitcoin to continue its dollar supremacy.

The IMF's future attitude toward stablecoins as reserve assets could have broad implications for global financial strategies. In contrast to the global trend, South Korea is adopting a wait-and-see, cautious attitude.

As Bitcoin's price has moved from $80,000 to $76,000 in a month, raising questions about its stability as a reserve asset, the BOK's stance remains crucial. At the time of writing, BTC has risen 0.16% in the last 24 hours and is now at $83,372.