Bank of Korea: "Bitcoin inclusion in foreign exchange reserves requires cautious approach"

"Price volatility is excessive... not even under consideration"

The Bank of Korea has expressed reluctance regarding discussions about including Bitcoin in foreign exchange reserves.

On the 16th, the Bank of Korea responded to written inquiries from Representative Cha Gyu-geun of the Joguk Innovation Party, a member of the National Assembly's Planning and Finance Committee, stating that "a cautious approach is needed regarding the inclusion of Bitcoin in foreign exchange reserves." This is the first time the Bank of Korea has stated its position on Bitcoin stockpiling.

High price volatility is cited as a primary concern. Bitcoin prices rose to around 160 million won in January but have recently plummeted to around 110 million won. Market opinions are divided between forecasts that Bitcoin could exceed 1 billion won in the future and assessments that it wouldn't be surprising if its value suddenly dropped to zero.

The Bank of Korea pointed out, "If the virtual asset market becomes unstable, there are concerns that transaction costs could rapidly increase during the process of converting Bitcoin to cash," adding, "We believe this does not align with the International Monetary Fund's (IMF) criteria for calculating foreign exchange reserves."

According to IMF standards, foreign exchange reserves must be immediately available when needed, therefore they should: 1) have liquidity and marketability, 2) be denominated in convertible currencies, and 3) generally have credit ratings at or above investment grade.

The Bank of Korea stated, "We have not discussed or reviewed the inclusion of Bitcoin in foreign exchange reserves to date," adding, "While the Czech Republic and Brazil have expressed positive opinions, the European Central Bank (ECB), Swiss Central Bank, and Japanese government have negative views."

Representative Cha also assessed that including Bitcoin in foreign exchange reserves would be inappropriate at this time. He said, "The Trump administration's designation of Bitcoin as a strategic asset means stockpiling Bitcoin confiscated from criminal proceeds," adding, "While Korea could utilize the Bitcoin it holds, including it in foreign exchange reserves would be inappropriate at this point."

Previously, U.S. President Donald Trump signed an executive order on the 6th (local time) directing the strategic stockpiling of Bitcoin. However, he drew a line stating that there are no plans to make additional purchases using tax money, and that the stockpiling would target federally owned Bitcoin seized as part of civil and criminal forfeiture proceedings.

Domestically, at a policy seminar held by the Democratic Party's Governance Plan Headquarters, expert opinions were presented suggesting that Korea should also consider including Bitcoin in foreign exchange reserves.

Oh Se-sung, Hankyung.com reporter sesung@hankyung.com