The volatility and general instability of Bitcoin might be its biggest bane in being considered a strategic reserve asset by most apex banks, including the Bank of Korea.
In a significant development, South Korea’s central bank, The Bank of Korea (BoK), has made it clear to the public that Bitcoin will not be part of the country’s foreign exchange reserves. Notably, the BOK stated that it will not hold the token as a reserve due to the volatility of digital assets and concerns over financial stability.
Central Bank Cites Price Instability and IMF Standards
As reported, the BOK ruled out Bitcoin as a reserve asset due to its unpredictable price movements and potential risks to financial stability.Â
According to a report from Korea Economic Daily, the decision was confirmed in response to an inquiry from the National Assembly’s Strategy and Finance Committee member.
In addition, the Central Bank clarified that Bitcoin’s extreme price swings raise concerns over its reliability as a store of value.Â
Similarly, the central bank warned that these fluctuations could lead to high transaction costs when converting Bitcoin into cash. This makes it unsuitable for foreign exchange reserves. The BOK stressed that Stability and liquidity are critical for reserve assets, and Bitcoin does not meet these requirements.
In related news, earlier this month, President Donald Trump of the United States of America signed an executive order to set up a Strategic Bitcoin reserve during the White House Crypto Summit.Â
Meanwhile, the Australian government has also dismissed the idea of holding a digital stockpile as part of its national reserve.
IMF Standards and Financial Stability
It is worth mentioning that the International Monetary Fund (IMF) has strict regulations for managing foreign exchange reserves, prioritizing liquidity, market stability, and credit risk.Â
The BOK mentioned that Bitcoin is not in sync with these standards due to its volatility. For context, Central banks typically hold reserves in assets like the US dollar, gold, and government bonds. They believe that these investments offer security and predictable value.
While South Korea has a thriving cryptocurrency market, with billions of dollars in daily trading volume, the government remains cautious. Regulators continue to ensure that digital assets do not disrupt traditional financial systems.
As of this publication, Coinmarketcap data shows that Bitcoin price was trading for $84,011, up by 1.28% in the past 24 hours.
Disclaimer: The information provided in this article is for informational purposes only. It does not constitute investment, financial, trading, or any other sort of advice. You should not treat any of BGECrypto’s content as such. BGEcrypto does not recommend that any cryptocurrency should be bought, sold, or held by you. Do your due diligence and consult your financial advisor before making any investment decisions.
