The Bank of Korea (BOK) has recently dismissed the possibility of adding bitcoin to its foreign exchange reserves, citing concerns over the digital currency’s price volatility. The central bank emphasized the need for a cautious approach when considering such a move, highlighting the discussions among lawmakers following US President Donald Trump’s announcement of a strategic bitcoin reserve and digital asset stockpile.

Responding to inquiries from Rep. Cha Gyu-geun of the Rebuilding Korea Party, the Bank of Korea clarified that it has not engaged in any discussions or evaluations regarding the inclusion of bitcoin in its foreign exchange reserves. The BOK pointed out the significant fluctuations in bitcoin prices as a key deterrent, noting that market instability could lead to a sharp increase in transaction costs for converting bitcoins.

Furthermore, the Bank of Korea underscored that cryptocurrencies like bitcoin do not align with the criteria for foreign exchange reserves established by the International Monetary Fund (IMF). These criteria typically encompass factors such as liquidity, market value, and credit rating, which cryptocurrencies currently do not meet.

This decision by the Bank of Korea reflects a broader trend among central banks globally, which have been cautious about incorporating cryptocurrencies into their official reserves due to the inherent risks associated with these digital assets. The stance taken by the BOK underscores the importance of stability and regulatory clarity in determining the suitability of assets for foreign exchange reserves.

While the debate around the role of cryptocurrencies in traditional financial systems continues, the Bank of Korea’s stance on bitcoin highlights the complexities and challenges involved in integrating digital assets into the reserve holdings of central banks. As the landscape of digital currencies evolves, regulatory frameworks and risk management practices will play a crucial role in shaping the future relationship between cryptocurrencies and official foreign exchange reserves.