The Central Bank of South Korea has rejected the possibility of holding Bitcoin in its foreign exchange reserves! Here's Why

The Bank of South Korea has ruled out the possibility of holding Bitcoin in its foreign exchange reserves, citing concerns about the cryptocurrency's high volatility and lack of 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's Strategy and Finance Committee, the Central Bank clarified that it does not consider Bitcoin as a reserve asset.

The central bank emphasized that the significant transaction costs associated with cashing out Bitcoin could pose a risk to financial stability.

In addition, the Central Bank of South Korea referred to the International Monetary Fund's guidelines on foreign exchange reserve management, which emphasize prudent control of (IMF) liquidity, market, and credit risks.

The debate over national Bitcoin reserves gained momentum after U.S. 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 is in line with Japan, Switzerland, and the European Central Bank, which have refrained from accepting Bitcoin as part of their foreign exchange reserves.

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

The country's financial authorities are gradually lifting restrictions on institutional crypto trading and are preparing a second legislative framework that is currently focused on stablecoin regulation.

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