The Bank of Korea announced on February 16, 2025, that it will not consider Bitcoin as part of its foreign exchange reserves due to volatility concerns.
The decision reflects caution towards cryptocurrencies amidst ongoing international discussions about their role in national financial strategies, with potential implications for South Korea’s economic approach.
South Korean Central Bank Cites Bitcoin Volatility
- The Bank of Korea’s announcement stems from the need for a cautious approach in managing reserves. This aligns with concerns over Bitcoin’s price volatility, as it fluctuated significantly over recent months.
- In its official statement, the central bank emphasized the challenges of adding Bitcoin as a reserve asset. Such challenges include high price instability and failure to meet IMF’s criteria.
Bitcoin Trading at $83,000 Amid Volatile Swings
-
The latest price data indicates that Bitcoin is currently trading at about $83,000, having fluctuated between $76,000 and $98,000. Experts note that this trend reflects typical market volatility.
- Analysts warn of increased transaction costs in converting Bitcoin to cash, highlighting potential financial and regulatory risks. They cite concerns over meeting IMF’s liquidity and currency criteria.
Historical Rejection of Bitcoin by Central Banks
- The BOK’s stance parallels decisions from major institutions like the European Central Bank, which have also rejected Bitcoin for similar reasons in the past.
- According to Professor Yang Jun-seok, it’s advisable for reserves to reflect trade partner currencies, echoing the preference for more traditional assets in reserves.
“It is appropriate for foreign exchange to be held in proportion to the currencies of countries with which we trade.” – Professor Yang Jun-seok, Catholic University of Korea
