The Bank of Korea (BOK) stated Sunday that it has not considered the possibility of incorporating bitcoin into its foreign exchange reserve, in an answer to a written query from a member of the National Assembly's Strategy and Finance Committee.
The BOK cited bitcoin's high volatility as a primary reason for its negative stance on accruing the cryptocurrency, the Korea Economic Daily reported.
The central bank expressed concern that volatility in the cryptocurrency market could lead to a significant surge in transaction costs when cashing out bitcoin, according to the news report.
Bitcoin also does not comply with the International Monetary Fund's guidelines for foreign exchange reserve management, the BOK said. The IMF states in its guidelines that a foreign exchange reserve must control liquidity, market and credit risks "in a prudent manner."
On March 6, U.S. President Donald Trump signed an executive order to establish a Strategic Bitcoin Reserve, based on the BTC the government seized from criminal or civil proceedings.
While Trump's move prompted several countries to positively consider creating their own bitcoin reserves, the South Korean central bank has cited skeptical views shared by Japan, Switzerland and the European Central Bank.
Beyond the issue of creating a bitcoin reserve, South Korea has recently been moving to loosen its strict regulations on crypto. The country's financial watchdog is currently rolling out its plan to gradually lift the ban on institutional crypto trading, and is preparing to establish its second crypto legal framework, focusing on managing stablecoins.
The Block reached out to the BOK for further comment.
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