South Korea excludes Bitcoin from foreign exchange reserves due to its instability

The Banca di Corea (BOK) clarified its position regarding the inclusion of Bitcoin (BTC) in national foreign exchange reserves. In response to a question posed by a member of the Comitato per la Strategia e le Finanze dell’Assemblea Nazionale, the central bank specified that it has never considered adopting BTC as part of the reserves.  

South Korea excludes Bitcoin from its reserve plan due to high volatility

The main motivation behind this decision is the extreme volatility of Bitcoin. The significant price fluctuations make conversion costs unpredictable, leading to high risks for the country’s reserves. According to the BOK, navigating the cryptocurrency markets could generate unpredictable transaction costs, putting the stability of South Korea’s financial resources at risk.

Furthermore, the Bank of Korea emphasized that Bitcoin does not meet the criteria set by the International Monetary Fund (IMF) for the management of foreign currency reserves. The IMF emphasizes the importance of prudent liquidity management, market risk, and credit risk, fundamental aspects for those holding currency reserves. The erratic nature of Bitcoin makes it inadequate to meet these criteria, further increasing the concerns of the South Korean central bank.

Bitcoin and cryptocurrencies on the rise in South Korea

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Despite this stance, South Korea maintains a rapidly expanding crypto ecosystem. Startups, tokens, exchanges, and local companies generate billions of dollars in daily trading volume in the country’s cryptocurrency market. The sector represents a significant portion of South Korea’s digital economy, with a high adoption of blockchain technologies and a growing number of retail and institutional investors active in the criptovalute sector.

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The price of Bitcoin remains under pressure

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At the time of the Bank of Korea’s statement, Bitcoin is quoted at over 83,400 dollars during the afternoon hours of the Asian market. However, the cryptocurrency records a decline of 1% in the last 24 hours, once again confirming its volatility.  
The exclusion of Bitcoin from South Korea’s foreign exchange reserves reflects a cautious stance by the central bank, in line with international standards. However, the cryptocurrency sector in the country continues to flourish, with growing interest from both investors and local businesses.

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