Bank of Korea Clarifies Its Stance on Bitcoin, Stating It Has Not Considered Including the Asset in Foreign Exchange Reserves

The Bank of Korea has clarified its stance on Bitcoin, stating it has not considered including the asset in foreign exchange reserves.

The Bank of Korea has no plans to include Bitcoin (BTC) in the country’s foreign exchange reserves, a central bank official has clarified.

This response came after an inquiry from a member of the National Assembly Planning and Finance Committee, Cha Gyu-geun, regarding a recent report by the Korea Economic Daily.

The official highlighted the need for a cautious approach, citing Bitcoin’s volatility and its failure to meet the International Monetary Fund (IMF) criteria for foreign exchange reserves.

High Volatility and Liquidity Concerns

The central bank official noted that Bitcoin’s price instability is a primary concern. At the start of the year, Bitcoin’s price reached 160 million won (120,000 USD) but recently declined to 110 million won (83,000 USD).

This significant fluctuation in Bitcoin’s value has led to uncertainty about its reliability as a reserve currency.

“The price of Bitcoin is currently fluctuating between 110 billion and 120 billion won. At the beginning of the year, it was at 160 billion won, and there are projections that it could go up to 1 trillion won or even fall to zero.”

Some market participants anticipate that Bitcoin could surpass 1 billion won, while others warn of a potential collapse to zero.

Given these projections, the Bank of Korea official warned that instability in the virtual asset market could increase transaction costs when converting Bitcoin into cash.

“If the cryptocurrency market becomes unstable, it will be more expensive to convert large amounts of Bitcoin into cash when needed due to liquidity issues.”

This factor raises further liquidity concerns, as foreign exchange reserves must be readily accessible in times of crisis.

Bitcoin Fails to Meet IMF Reserve Standards

The Bank of Korea official also stated that Bitcoin does not meet the IMF’s criteria for foreign exchange reserves.

According to the IMF, foreign exchange reserves should be highly liquid, denominated in a major convertible currency, and have an investment-grade credit rating.

However, Bitcoin lacks these attributes, rendering it unsuitable for inclusion in Korea’s foreign exchange reserves.

Despite some countries, such as the Czech Republic and Brazil, recently expressing interest in investing a small portion of their foreign exchange reserves in cryptocurrencies, major financial institutions, including the European Central Bank, the Swiss National Bank, and the Japanese government, have opposed the idea.

The Bank of Korea official affirmed that there has been no internal discussion or review by the central bank regarding the possibility of investing in Bitcoin for the country’s foreign exchange reserves.

International Perspectives on Bitcoin Reserves

The debate over Bitcoin’s role in national reserves has gained momentum globally. On March 6, U.S. President Donald Trump signed an executive order creating a national reserve of Bitcoin.

Notably, the reserve will comprise Bitcoin acquired through civil and criminal forfeiture processes, kicking off the initiative.

Furthermore, the administration is planning to make additional purchases in budget-neutral ways throughout the year. The order directs the Treasury Secretary to identify and propose legislation that would enable these ongoing purchases.