The United States government may be keen on owning and maintaining a digital asset stockpile, but not all countries feel the same way. South Korea, for one, has expressed its disinterest in including bitcoin (BTC), or any cryptocurrencies, in its foreign exchange reserves.
A report from the local media Korea Economic Daily revealed that the nation’s central bank, The Bank of Korea, is not considering establishing a strategic bitcoin reserve or even including the asset in its foreign exchange reserves.
No Bitcoin Reserve for South Korea
According to the report, the Bank of Korea unveiled its stance in response to a written inquiry from Representative Cha Gyu-Geun, a member of the Democratic Party of Korea and the National Assembly Planning and Finance Committee.
In the response dated March 16, the Bank of Korea said it has never considered including BTC in its foreign exchange reserves. The bank also mentioned the need to approach the idea of stockpiling BTC cautiously for several reasons.
For starters, the bank insisted that bitcoin’s high volatility would be a challenge. The asset’s price is constantly fluctuating. In the last several weeks, its value has fallen from a high of $109,000 to as low as $76,700. The asset was trading at $83,500 at press time, with a slight 24-hour decline, per data from CoinMarketCap.
The Bank of Korea said it could encounter high transaction costs due to market instability when selling its BTC and risks incurring losses during future bitcoin sales.
BTC Fails to Meet IMF Standards
Additionally, the South Korean central bank asserted that bitcoin does not meet the International Monetary Fund’s (IMF) standards for being included in foreign exchange reserves. The financial institution cited the standards, which state that reserves must be immediately available when needed, have a credit rating of at least qualified investment grade, have liquidity and marketability, and can be expressed in a convertible currency.
To the Bank of Korea, bitcoin does not meet these standards and so cannot be added to the institution’s foreign exchange reserves.
“It is known that some countries, such as the Czech Republic and Brazil, have expressed positive opinions, but the European Central Bank (ECB), the Swiss National Bank, and the Japanese government have expressed negative opinions,” the Bank of Korea added.
The bank’s response follows numerous requests for a strategic bitcoin reserve by South Korean financial experts and Democratic Party lawmakers. The call for a bitcoin reserve in the country comes as the U.S. president establishes a digital asset stockpile in the country.
