The United States government may be keen on owning and maintaining a digital asset stockpile, but not all countries share this perspective. South Korea, for instance, has explicitly expressed its disinterest in integrating bitcoin (BTC) or any cryptocurrencies into its foreign exchange reserves.
A report from the local media outlet Korea Economic Daily revealed that The Bank of Korea, the nation’s central bank, is not currently considering the establishment of a strategic bitcoin reserve or the inclusion of BTC in its foreign exchange reserves.
No Bitcoin Reserve for South Korea
According to the report, The Bank of Korea articulated its position in response to a written inquiry from Representative Cha Gyu-Geun, a member of the Democratic Party of Korea and the National Assembly Planning and Finance Committee. In a response dated March 16, the Bank of Korea stated that it had never contemplated incorporating BTC into its foreign exchange reserves. It also emphasized the need for a cautious approach toward the idea of stockpiling bitcoin for several key reasons.
Primarily, the Bank pointed out that bitcoin’s high volatility poses a significant challenge. The asset’s price is prone to rapid fluctuations; for instance, in recent weeks, its value plummeted from a high of $109,000 to a low of $76,700. As of the time of this article, BTC was trading at $83,500, reflecting a slight 24-hour decline, per data from CoinMarketCap.
The Bank of Korea warned that it could face substantial transaction costs stemming from market instability when attempting to liquidate its BTC holdings, along with the potential for incurring losses during future bitcoin sales.
BTC Fails to Meet IMF Standards
Moreover, the South Korean central bank asserted that bitcoin does not satisfy the International Monetary Fund’s (IMF) criteria for inclusion in foreign exchange reserves. The financial institution highlighted several standards, which stipulate that reserves must be immediately accessible when required, possess a credit rating of at least qualified investment grade, exhibit liquidity and marketability, and be expressible in convertible currency.
Consequently, the Bank of Korea concluded that bitcoin does not fulfill these requirements and therefore cannot be added to the institution’s foreign exchange reserves.
“While it is known that some countries, such as the Czech Republic and Brazil, have expressed positive opinions regarding bitcoin, the European Central Bank (ECB), the Swiss National Bank, and the Japanese government have voiced objections,” the Bank of Korea added.
This response follows numerous requests from South Korean financial experts and Democratic Party lawmakers advocating for the establishment of a strategic bitcoin reserve. This call comes amidst the backdrop of the U.S. president’s initiative to create a digital asset stockpile within the United States.
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