Bank of Korea Rejects Bitcoin for Reserves, Citing Volatility and Liquidity Risks

• The Bank of Korea will not add Bitcoin to reserves due to high price volatility and liquidity risks.
• Bitcoin prices have fluctuated widely making it unsuitable for South Korea’s foreign exchange reserves.
• South Korea prefers stable and liquid assets for reserves despite global discussions on Bitcoin adoption.

The Bank of Korea (BOK) has decided against including Bitcoin in its foreign exchange reserves. Officials cited concerns over extreme price fluctuations and liquidity challenges. In response to a written inquiry from Representative Cha Gyu-geun, the central bank confirmed that it has not considered Bitcoin as part of its reserve strategy. 

Bitcoin’s Volatility Raises Concerns

BOK documented Bitcoin’s price volatility which led to significant market movements during recent months. Bitcoin experienced price fluctuations between $98,000 to $76,000 before it reached stability at $83,000 while recording a 15% decrease from its February peak. The central bank warned about rising Bitcoin transaction costs which would happen when markets experience instability. 

Despite increasing global interest in cryptocurrency reserves, South Korea remains committed to traditional financial assets. BOK officials underscored that reserves must be highly liquid, accessible when needed, and hold investment-grade credit ratings. Bitcoin does not meet these requirements. 

Global Trends in Crypto Reserves

Other countries are exploring digital asset reserves. Earlier this month, U.S. President Donald Trump issued an executive order to establish a Bitcoin reserve . The move has intensified discussions on Bitcoin’s role in national financial strategies. 

During a recent seminar, crypto representatives and Democratic Party leaders advocated to add Bitcoin into South Korea’s national reserve portfolio. The representatives requested that South Korea create its own stablecoin based on the local currency. The central bank continues to maintain a cautious stance by putting financial stability before considering any potential crypto adoption. 

Expert Opinions on Future Crypto Reserves

Financial experts suggest that future changes in international monetary policies could influence Bitcoin’s reserve status. Some believe the International Monetary Fund’s potential recognition of stablecoins as foreign exchange reserves could reshape the market. South Korea continues to monitor these developments while maintaining its conservative approach.