The Bank of Korea (BOK) announced it will not use Bitcoin as a reserve asset, citing its high volatility.
Reasons for BOK's Reluctance to Use Bitcoin
According to the Korea Economic Daily, BOK believes Bitcoin poses significant risks to the country's financial stability. High price fluctuations in the cryptocurrency market could lead to substantial costs during the selling process, complicating the central bank’s liquidity management.
International Reserve Recommendations
The International Monetary Fund (IMF) guidelines for foreign reserve management do not classify Bitcoin as a suitable asset. The IMF advises central banks to manage their reserves by carefully controlling market liquidity, credit, and market risks. BOK believes that Bitcoin does not meet these criteria.
South Korea's Cryptocurrency Policies
On March 6, U.S. President Donald Trump ordered the creation of a “Strategic Bitcoin Reserve” comprised of confiscated BTC, sparking discussions in some countries about creating their own Bitcoin reserves. However, major financial institutions like Japan, Switzerland, and the European Central Bank remain skeptical. South Korea has now joined these nations.
South Korea continues to attract attention with its steps towards softer cryptocurrency regulations. It plans to gradually lift the ban on cryptocurrency trading for institutional investors and is preparing a second legal reform package focusing on stablecoins.
