Bank of Korea to take ‘cautious approach’ to Bitcoin reserve

The Bank of Korea says it is taking a “cautious approach” to potentially including Bitcoin as a foreign exchange reserve.

Officials from the Korean central bank said in a March 16 response to a written inquiry that they have not looked into a potential Bitcoin (BTC) reserve, citing high volatility. 

Responding to a question from Representative Cha Gyu-geun of the National Assembly’s Planning and Finance Committee, central bankers said that they have “neither discussed nor reviewed the possible inclusion of Bitcoin in foreign exchange reserves, adding that “a cautious approach is needed,” according to the Korea Herald.

“Bitcoin’s price volatility is very high,” the central bank noted, before adding that “in the case of cryptocurrency market instability, transaction costs to cash out Bitcoins could rise drastically.”

Over the past 30 days, Bitcoin prices have swung wildly between $98,000 and $76,000 before settling at current levels of around $83,000 in a 15% decline since Feb. 16, according to CoinGecko. 

The decision comes amid increasing global discussions on the role of crypto assets in national financial strategies, sparked by US President Donald Trump’s executive order earlier this month establishing a strategic Bitcoin reserve and digital asset stockpile.  

At a seminar on March 6, crypto industry lobbyists and some members of Korea’s Democratic Party urged the country to integrate Bitcoin into its national reserves and develop a won-backed stablecoin. 

However, the Bank of Korea emphasized that its foreign exchange reserves must have liquidity and be immediately usable when needed, as well as a credit rating of investment grade or higher, criteria that Bitcoin does not meet, in its opinion. 

Professor Yang Jun-seok of the Catholic University of Korea concurred, stating, “It is appropriate for foreign exchange to be held in proportion to the currencies of countries with which we trade.”

Professor Kang Tae-soo from the KAIST Graduate School of Finance commented on the US being likely to leverage stablecoins rather than BTC to maintain dollar hegemony before adding, “Whether the IMF will recognize stablecoins as foreign exchange reserves in the future is important.”

Related: Democrat lawmaker urges Treasury to cease Trump’s Bitcoin reserve plans

Earlier this month, South Korea’s financial regulator examined the Japanese Financial Services Agency’s legislative trend toward crypto assets as it mulls lifting a ban on crypto exchange-traded funds in the country.

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