South Korea Rejects Bitcoin as Strategic Reserve Asset
The Bank of Korea (BOK) has ruled out the possibility of adding Bitcoin (BTC) to its foreign exchange reserves, citing concerns over price volatility and risks to financial stability, according to a report by Korea Economic Daily.
Key Highlights:
- The BOK stated that Bitcoin’s extreme price fluctuations could pose significant risks to the country’s reserve assets.
- The central bank emphasized that Bitcoin does not meet the International Monetary Fund’s (IMF) criteria for foreign exchange reserves, which require prudent management of liquidity, market, and credit risks.
BOK’s Stance on Bitcoin
In response to inquiries from a member of the National Assembly’s Strategy and Finance Committee, the BOK confirmed that it has no plans to adopt Bitcoin as part of its foreign exchange reserves.
The primary concern raised by the central bank is Bitcoin’s well-known price volatility. The BOK believes that the unpredictable nature of the cryptocurrency could lead to significant transaction costs when converting it to cash, thereby introducing unnecessary financial risk to the country’s reserves.
Furthermore, the BOK stressed that Bitcoin fails to align with the IMF’s foreign exchange reserve management standards. The IMF underscores the need for stable asset management, ensuring liquidity, market stability, and credit security—criteria that Bitcoin, due to its erratic nature, does not meet.
South Korea’s Crypto Landscape
Despite the BOK’s reservations, South Korea remains a major player in the global crypto industry. The country boasts a thriving digital asset ecosystem, with local startups, exchanges, and blockchain projects generating billions of dollars in daily trading volumes within a highly active market.
Bitcoin Market Update
As of the latest trading session in Asian afternoon hours, Bitcoin is priced at over $83,400, marking a 1% decline in the past 24 hours.
Conclusion
While Bitcoin continues to gain mainstream acceptance in some countries as a store of value or hedge against inflation, South Korea’s central bank remains steadfast in its cautious approach. The BOK’s decision aligns with its commitment to financial stability and prudent reserve management.