The Bank of Korea has recently announced that it is taking a cautious approach towards potentially including Bitcoin in its foreign exchange reserves. This decision comes after a written inquiry from Representative Cha Gyu-geun of the National Assembly’s Planning and Finance Committee.

According to officials from the Korean central bank, they have not yet looked into the possibility of adding Bitcoin (BTC) to their reserves due to its high volatility. They stated that a cautious approach is necessary, as Bitcoin’s price can fluctuate greatly and the transaction costs to cash out could rise drastically in times of market instability.

This announcement comes amidst global discussions on the role of cryptocurrencies in national financial strategies, sparked by US President Donald Trump’s executive order to establish a strategic Bitcoin reserve and digital asset stockpile. However, the Bank of Korea has emphasized that their foreign exchange reserves must have liquidity and be immediately usable when needed, as well as a credit rating of investment grade or higher. These are criteria that Bitcoin does not currently meet in their opinion.

Some members of Korea’s Democratic Party have urged the country to integrate Bitcoin into its national reserves and develop a won-backed stablecoin. However, the Bank of Korea has stated that their reserves must be held in proportion to the currencies of countries with which they trade, and Bitcoin does not fit this criteria.

Professor Yang Jun-seok of Catholic University of Korea agrees with the Bank of Korea’s decision, stating that it is appropriate for foreign exchange to be held in proportion to the currencies of trading partners. Professor Kang Tae-soo from the KAIST Graduate School of Finance also commented on the US likely leveraging stablecoins rather than BTC to maintain dollar hegemony.

In related news, a Democrat lawmaker has urged the US Treasury to cease Trump’s plans for a Bitcoin reserve. Meanwhile, South Korea’s financial regulator is examining Japan’s legislative trend towards crypto assets as they consider lifting a ban on crypto exchange-traded funds in the country.

In conclusion, while there is increasing global discussion on the role of cryptocurrencies in national financial strategies, the Bank of Korea has taken a cautious approach towards including Bitcoin in their foreign exchange reserves. They have cited Bitcoin’s high volatility and lack of liquidity and credit rating as reasons for their decision.