South Korea's Central Bank Rules Out the Possibility of Holding Bitcoin in Foreign Exchange Reserves! Here's Why

South Korea's central bank has rejected the possibility of holding Bitcoin in its foreign exchange reserves, citing concerns about the cryptocurrency's high volatility and non-compliance with international financial rules.

South Korea's Central Bank Rejects Bitcoin Reserves, Citing Volatility

In response to a written question from a member of the National Assembly Strategy and Finance Committee, the Central Bank announced that it does not consider Bitcoin as a reserve asset.

The central bank stressed that the significant transaction costs associated with converting Bitcoin into cash could pose a risk to financial stability.

Additionally, the South Korean central bank referred to the International Monetary Fund's (IMF) guidelines on foreign exchange reserve management, which emphasize prudent control of liquidity, market and credit risks.

Discussions regarding national Bitcoin reserves gained momentum after US President Donald Trump signed an executive order on March 6 to create a Strategic Bitcoin Reserve using BTC seized from criminal and civil cases.

While Trump’s move has led many countries to explore the idea of holding Bitcoin reserves, South Korea remains skeptical. The central bank’s position aligns with Japan, Switzerland and the European Central Bank, which have all been wary of accepting Bitcoin as part of their foreign exchange reserves.

Despite rejecting Bitcoin as a reserve asset, South Korea is taking steps to ease strict crypto regulations.

The country’s financial authorities are gradually lifting restrictions on institutional crypto trading and are currently preparing a second legal framework focused on stablecoin regulation.

As South Korea balances crypto market growth with regulatory oversight, debate over Bitcoin’s role in national reserves is likely to continue.

*This is not investment advice.