Bank of Korea Rejects Bitcoin as Reserve Asset, Citing High Volatility

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The Bank of Korea (BOK) remains hesitant about incorporating Bitcoin into its foreign exchange reserves, citing concerns over high volatility and liquidity despite growing global interest in digital assets.

In response to an inquiry from Representative Cha Gyu-geun of the National Assembly’s Planning and Finance Committee on March 16, Bank of Korea officials stated that no internal discussions or reviews had taken place regarding Bitcoin’s inclusion in the nation’s reserves. The central bank emphasized that Bitcoin’s price volatility presents a significant challenge, noting, “Bitcoin’s price volatility is very high.”

Volatility and Liquidity Concerns

The BOK’s concerns are underscored by Bitcoin’s recent price fluctuations. Over the past month, Bitcoin has swung between $98,000 and $76,000 before stabilizing around $83,000 as of mid-March—a 15% decline since mid-February. Such volatility poses risks for central banks considering digital assets as part of their reserves.

Also read: Bitcoin Strategic Reserve Explained

Recent discussions on cryptocurrency reserves have been fueled by an executive order from US President Donald Trump, which aims to establish a strategic Bitcoin reserve and digital asset stockpile. This has sparked international debates on the potential role of cryptocurrencies in national financial strategies.

Bitcoin Fails to Meet Bank of Korea Reserve Criteria

Despite mounting interest, the Bank of Korea reaffirmed that its foreign exchange reserves must meet strict criteria, including liquidity, immediate usability, and an investment-grade credit rating—all of which Bitcoin currently lacks. As a result, the central bank maintains that Bitcoin does not qualify as a viable reserve asset under its existing framework.

While the Bank of Korea adopts a cautious stance, discussions within South Korea on the integration of digital assets continue. During a recent seminar, cryptocurrency industry lobbyists and some members of the Democratic Party advocated for the inclusion of Bitcoin in national reserves and proposed the development of a won-backed stablecoin.

Also read: Crypto Reserve Showdown: Will Bitcoin Stand Alone?

However, financial experts remain divided. Professor Yang Jun-seok of the Catholic University of Korea argued that foreign exchange reserves should be aligned with the currencies of South Korea’s major trading partners, implying that Bitcoin may not be suitable. Meanwhile, Professor Kang Tae-soo of the KAIST Graduate School of Finance suggested that stablecoins may be a more practical alternative, allowing governments to maintain control over financial stability while adapting to the evolving digital economy.

As South Korea explores regulatory approaches to digital assets, including the potential lifting of its ban on crypto exchange-traded funds (ETFs), the debate over Bitcoin’s role in national reserves is likely to persist.

Author

Steven Walgenbach

Steven's passion for cryptocurrency and blockchain technology began in 2014, inspiring him to immerse himself in the field. He notably secured a top 5 world ranking in robotics. While he initially pursued a computer science degree at the University of Texas at Arlington, he chose to pause his studies after two semesters to take a more hands-on approach in advancing cryptocurrency technology. During this period, he actively worked on multiple patents related to cryptocurrency and blockchain. Additionally, Steven has explored various areas of the financial sector, including banking and financial markets, developing prototypes such as fully autonomous trading bots and intuitive interfaces that streamline blockchain integration, among other innovations.

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