The central bank of South Korea took a bold step by rejecting a proposal to integrate Bitcoin into its foreign currency reserves. This verdict addressed ongoing concerns over cryptocurrencies’ position in traditional financial institutions.
International trends had encouraged the suggestion, but the Bank of Korea highlighted worries about liquidity and volatility. This choice demonstrates South Korea’s cautious approach to integrating digital assets into its financial system as cryptocurrencies gain international attention.
South Korea’s investigation of Bitcoin as a reserve asset gathered pace following the United States’ creation of a Strategic Bitcoin Reserve earlier this month. Lawmaker Cha Gyu-geun of the Rebuilding Korea Party formally recommended adding Bitcoin to South Korea’s foreign exchange reserves.
This suggestion comes amid mounting worries that South Korea will fall behind global financial trends. Democratic Party members and experts advocated for a proactive response during a March 6 seminar.
Bank of Korea’s Decision on Bitcoin
The proposal to add Bitcoin to the Bank of Korea’s foreign exchange reserves has been firmly rejected. The key reasons are Bitcoin’s volatile price swings and liquidity problems. The price of Bitcoin, for instance, may fluctuate greatly; in a short period, it fluctuated from $98,000 to $76,000.
The BOK stated that Bitcoin does not meet the International Monetary Fund’s (IMF) reserve asset standards. These standards include having a good credit rating and being freely convertible. To guarantee economic stability, the bank reaffirmed its priority on traditional financial assets.
Although South Korea remains cautious, other nations consider Bitcoin a strategic reserve. The Czech Republic plans to give 5% of its reserves to Bitcoin, with plans to reduce reliance on existing currencies. El Salvador, a pioneer in crypto adoption, employs Bitcoin as legal payment to assist economic growth. Meanwhile, Japan and the European Central Bank stay apprehensive, citing volatility and liquidity worries.
The Bank of Korea’s decision on Bitcoin does not alter global perspectives on it. The Financial Services Commission (FSC) plans to implement new criteria for institutional crypto investments by Q3 2025, allowing professional investors and charities to trade digital assets within a regulated framework.
This move attempts to attract more serious investors and stabilize the market, which has seen over 30% of the population actively trading cryptocurrencies.
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