The Bank of Korea has definitively rejected Bitcoin for South Korea’s foreign exchangeA platform for buying, selling, and trading cryptocurrencies reserves, citing excessive volatility and non-compliance with IMF standards. Officials noted Bitcoin’s price fluctuations between 160-110 million won represent unacceptable risk for national reserves. This conservative stance contrasts with North Korea’s reported $1.13 billion Bitcoin holdings. Global markets reacted with Bitcoin dropping from $96,000 to $93,700, with steeper declines on Korean exchanges. The decision reveals broader regulatory complexities in Asia’s evolving cryptocurrencyA digital or virtual currency that uses cryptography for sec landscape.
Amid growing global interest in cryptocurrency adoption by central banks, the Bank of Korea has definitively rejected Bitcoin‘s inclusion in its foreign exchange reserves, citing excessive price volatility and incompatibility with established reserve asset criteria.
In its first official statement regarding Bitcoin as a reserve asset, the central bank emphasized how recent price fluctuations—from 160 million won to 110 million won—create unacceptable risk for national reserves. This stance aligns with most major central banks worldwide that maintain conservative approaches toward crypto assets.
Beyond volatility concerns, the Bank of Korea noted that Bitcoin fails to meet International Monetary Fund standards for foreign exchange reserves, specifically regarding liquidityThe ease with which an asset can be bought or sold without a, marketability, and credit rating requirements.
The bank expressed particular concern about potential transaction cost increases during liquidation scenarios, which would impair the primary function of reserves as immediate crisis resources. Security measures implemented by financial protection services also influenced the bank’s decision to avoid cryptocurrency investments.
The announcement comes against a backdrop of contrasting international developments, particularly U.S. President Trump’s executive order exploring a strategic Bitcoin reserve and North Korea’s reported accumulation of cryptocurrency assets. North Korea now holds approximately 13,518 BTC, valued at $1.13 billion, making it one of the largest state-backed holders of Bitcoin.
Meanwhile, Japan and Hong Kong have made significant regulatory progress in digital asset management, creating pressure on South Korea to maintain competitiveness in the international crypto economy.
South Korea’s regulatory environment presents additional challenges, with local exchanges restricting foreign traders and corporate crypto accounts only recently gaining approval. Bank of Korea officials confirmed that no official discussions have taken place regarding Bitcoin’s inclusion in reserves, contradicting claims from some lawmakers.
The absence of Bitcoin and Ethereum ETFs in Korean markets reflects the broader regulatory uncertainty surrounding digital assets, though some analysts anticipate potential shifts following future elections.
Several academic experts have proposed alternatives to Bitcoin inclusion, with Professor Yang Jun-seok suggesting reserves should primarily reflect trading partner currencies, while Professor Kang Tae-soo advocated exploring stablecoins as a compromise that maintains dollar hegemony while embracing digital innovation.
Both emphasized the importance of monetary sovereignty in an increasingly digitized financial landscape.
Market reaction to the announcement was swift, with Bitcoin dropping from $96,000 to $93,700 globally while experiencing sharper declines on South Korean exchanges—falling as low as $61,674 and creating an $8,000 arbitrage opportunity for traders.
This price differential highlights the market’s sensitivity to regulatory developments and South Korea’s significant position in global cryptocurrency markets despite its relatively conservative institutional approach.
The decision arrives as lawmakers from both the ruling party and opposition continue debating cryptocurrency integration, with Democratic Party members recently hosting a seminar on Bitcoin’s potential role in national financial strategy.
