South Korea has no plans to incorporate Bitcoin into its foreign exchange reserves, according to the country's central bank.
On March 16, local media outlet Yonhap reported that officials from the Bank of Korea had ruled out the addition of Bitcoin (BTC) to their foreign exchange reserves in response to a written investigation from the National Assembly's Planning and Finance Committee Representative Chagyu-gun.
The central bank cited the high volatility of Bitcoin as a major concern, warning that if the crypto market becomes unstable, “the transaction costs to cash out Bitcoin could rise dramatically.”
The authorities also pointed out that Bitcoin does not meet International Monetary Fund standards for foreign exchange reserves that require assets to maintain liquidity, market stability and investment grade credit ratings.
In particular, following the US government's decision to establish strategic Bitcoin reserves, the debate on national crypto reserves has gained global traction. Some countries, such as Brazil and the Czech Republic, have even expressed openness to the idea.
However, the Bank of Korea argued that a “cautious approach” was needed, noting that institutions such as the European Central Bank, the Swiss National Bank and the Japanese financial authorities shared similarly skeptical attitudes.
The bank also made it clear that it has not reviewed the possibility of incorporating Bitcoin into its reserves and has not formally discussed it.
According to Yonghap, some members of the South Korean Democratic Party urged central banks to explore the potential role of Bitcoin in the country's financial system at a policy seminar on March 6.
As previously reported by crypto.news, the Financial Services Commission is taking the same stance. In November, FSC Chairman Kim Byung-han confirmed the appeal for the National Bitcoin Reserve, but rejected the idea as premature.
However, South Korea is gradually relaxing its stance on regulating cryptocurrencies. The country's financial watchdog is preparing a second legal framework focused on surveillance of Stablecoin as it lifts institutional restrictions on crypto trading.
Policymakers are also considering allowing crypto exchange trade funds that could present new opportunities for the country's financial sector, according to the chairman of the South Korean Exchange.
