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Imagine you want to invest in something for the future, but the price keeps going up and down every day. That’s how the Bank of Korea (BOK) sees Bitcoin, which is why it is being “very cautious” about whether to use Bitcoin as a foreign exchange reserve. On March 16, responding to a written inquiry, Korean Central Bank officials said they had not investigated a possible Bitcoin reserve due to high volatility.
When asked by Representative Cha Gyu-geun from the National Assembly’s Finance Committee, central bankers stated that they have “neither discussed nor reviewed the possible inclusion of Bitcoin in foreign exchange reserves, adding that “a cautious approach is required,” as reported by the Korea Herald.
Why the Bank of Korea Does Not Trust Bitcoin
The central bank said, “Bitcoin‘s price volatility is very high.” They also said, “If the cryptocurrency market becomes unstable, transaction costs to cash out Bitcoins could rise drastically.”
According to CoinGecko, Bitcoin prices have dropped 15% since February 16 and have been wildly fluctuating between $98,000 and $76,000 over the last 30 days. They are now hovering around $83,000.
What Other Countries Are Thinking About Bitcoin Reserves?
The decision comes after US President Donald Trump’s executive order earlier this month set up a strategic Bitcoin reserve and digital asset stockpile. The announcement led to more discussions around the world about the role of crypto assets in national financial strategies.
On March 6, at a seminar, crypto industry lobbyists and some members of Korea’s Democratic Party urged the country to include Bitcoin in its national reserves and develop a won-backed stablecoin.
The Bank of Korea, on the other hand, made it clear that its foreign exchange reserves must be liquid and ready to be used right away if needed. They must also have a credit rating of investment grade or higher, which Bitcoin does not meet, in its opinion.
“It is appropriate for foreign exchange match to the currencies of countries with which we trade,” agreed Professor Yang Jun-seok of the Catholic University of Korea.
Professor Kang Tae-soo from the KAIST Graduate School of Finance said that the US is likely to use stablecoins rather than BTC to maintain dollar hegemony. He also said, “It is important to know whether the IMF will recognize stablecoins as foreign exchange reserves in the future.”
This month, South Korea’s financial regulator looked at how the laws of the Japanese Financial Services Agency are changing to support crypto assets. This is because the country is considering whether to lift the ban on crypto exchange-traded funds.
Final Thought
The US is already moving forward with its Bitcoin reserves, but South Korea is taking its time. The Bank of Korea thinks Bitcoin is too risky, but some experts and politicians see it as the way of the future. One thing is for sure, crypto is becoming an important part of conversations about money around the world. In the end, the real question is whether Korea will change its mind.
