Against the backdrop of many countries accelerating their exploration of integrating cryptocurrencies into national financial systems, the Bank of Korea (BOK) officially responded to a legislative inquiry on March 16, clearly stating that it has not yet discussed the feasibility of including Bitcoin in its foreign exchange reserves. The central bank emphasized the need for an “extremely cautious approach” to the risks posed by the cryptocurrency market. This stance not only highlights the controversy surrounding the topic of Bitcoin strategic reserves within traditional financial systems but also reflects the deep-seated博弈 faced by central banks in the wave of digital assets.
Bank of Korea: Bitcoin Fails to Meet Core Standards for Foreign Exchange Reserves
In a written response to an inquiry from Cha Gyu-geun, a member of the National Assembly’s Planning and Finance Committee, the Bank of Korea pointed out that Bitcoin’s high price volatility, insufficient market liquidity, and lack of credit ratings are critical flaws that prevent it from meeting the core requirements for national foreign exchange reserves. The central bank emphasized that its foreign exchange reserve assets must adhere to the principles of “immediate usability” and “investment-grade credit ratings.” As a decentralized asset, Bitcoin cannot be quickly converted into fiat currency through traditional financial channels, nor can it reliably fulfill international payment functions during crises.
This position directly addresses recent domestic calls in South Korea to follow the U.S. in establishing a Bitcoin strategic reserve. On March 6, the Democratic Party of Korea and some cryptocurrency industry lobbyists proposed at a seminar that the government should actively explore incorporating Bitcoin into national reserve assets and promote the issuance of a won-backed stablecoin to enhance financial sovereignty. However, the Bank of Korea made it clear that it remains skeptical about the feasibility of a Bitcoin strategic reserve at this stage, warning that “if the cryptocurrency market suddenly becomes turbulent, the cost of liquidating Bitcoin could skyrocket, severely threatening the safety margin of foreign exchange reserves.”
Bitcoin Price Volatility: A Fatal Flaw for Strategic Reserves
According to CoinGecko data, Bitcoin prices fluctuated wildly between 76,000and98,000 over the past 30 days, settling around $83,000 by mid-March, a 15% drop from the February 16 high. The Bank of Korea specifically noted that such volatility makes Bitcoin unsuitable for the value-preservation function of foreign exchange reserves. For example, if the Bank of Korea had purchased Bitcoin at its peak in March 2024 and included it in strategic reserves, the paper loss could have reached hundreds of millions of dollars within just half a month—a risk exposure that clearly violates the prudent principles of national foreign exchange management.
Yang Jun-seok, an economics professor at the Catholic University of Korea, supported the central bank’s stance, stating, “The allocation of foreign exchange reserves needs to match the currency structures of major trading partners, and Bitcoin’s global liquidity is fundamentally different from sovereign currencies.” He further pointed out that even if the U.S. recently promoted a Bitcoin strategic reserve plan through an executive order, its essence remains a geopolitical maneuver rather than a purely economic decision. If South Korea blindly follows suit, it could face more severe liquidity shocks due to differences in market size.
Global Policy Divergence: Opportunities and Controversies Surrounding Bitcoin Strategic Reserves
The Bank of Korea’s cautious stance contrasts sharply with international policy trends. In early March, former U.S. President Donald Trump signed an executive order requiring the federal government to establish a Bitcoin strategic reserve and explore military applications of digital assets. This move was interpreted as an innovative attempt to consolidate dollar hegemony. Meanwhile, Japan’s Financial Services Agency (FSA) is accelerating the revision of its cryptocurrency regulatory framework, planning to allow the launch of Bitcoin spot ETFs domestically, indirectly paving the way for institutional investors to allocate Bitcoin strategic reserves.
However, policy divergences are also intensifying. Kang Tae-soo, a professor at the KAIST Graduate School of Finance, analyzed, “The U.S. is more likely to maintain monetary dominance through stablecoins rather than Bitcoin, as their programmability and regulatory compatibility better align with traditional financial systems.” He also noted that whether the International Monetary Fund (IMF) will recognize stablecoins as foreign exchange reserve assets in the future will be a key variable influencing global trends in Bitcoin strategic reserves.
South Korea’s Gradual Crypto Policy Reforms
Despite halting the Bitcoin strategic reserve plan, South Korea has not stopped its布局 in digital assets. In early March, the Financial Supervisory Service (FSS) announced that it is studying Japan’s legislative experience with crypto assets and considering lifting the ban on cryptocurrency exchange-traded funds (ETFs). This signal is seen by the market as a tentative move by South Korea to gradually embrace digital assets within a “risk-isolation” framework.
Additionally, lawmakers from the Democratic Party of Korea continue to urge the government to issue a won-backed stablecoin to counter the global competition in central bank digital currencies (CBDCs). Supporters argue that if South Korea can build a dual-track system of “Bitcoin strategic reserves + fiat stablecoins,” it could hedge against the risks of escalating dollar hegemony while injecting strategic resources into the local blockchain industry. However, opponents worry that prematurely tying national credit to cryptocurrencies could trigger systemic financial risks.
Future Outlook: The Long-Term Game of Bitcoin Strategic Reserves
Currently, Bitcoin strategic reserves have become a new focus in global financial governance. For South Korea, the central bank’s cautious stance is both an objective response to market realities and a way to leave room for future policy flexibility. If the U.S. Bitcoin strategic reserve plan makes substantial progress or the IMF adjusts its classification standards for crypto assets, South Korea may be forced to reassess its position.
On the other hand, the growing demand for expansion in South Korea’s domestic crypto industry and the lag in its regulatory framework are becoming increasingly apparent. How to strike a balance between “innovation incentives” and “risk control” will determine whether South Korea can seize the initiative in the global race for Bitcoin strategic reserves. As industry insiders have noted, “The strategic value of Bitcoin lies not only in its price volatility but also in its paradigm shift as a decentralized asset. The evolution of national reserve systems will ultimately be a multi-dimensional game of technology, policy, and geopolitical.”
