Following U.S. President Donald Trump's signing of an executive order stating that he would 'make Bitcoin a strategic reserve asset,' discussions about the government's virtual asset reserves have begun in South Korea. As the government has decided to gradually allow corporate accounts for virtual assets, the Democratic Party also held a seminar on the topic of 'including Bitcoin in the foreign exchange reserves or investing in it through the national pension.'
However, is it necessary for South Korea to hold virtual assets as part of foreign exchange reserves or national pension assets? A survey by ChosunBiz of 10 domestic financial and currency experts found that all respondents answered, 'It's too early.'
◇ All experts say, 'Holding virtual assets in foreign exchange reserves is difficult to implement.'
According to the political circles on the 14th, the ruling Democratic Party's policy planning department discussed options for 'integrating Bitcoin into the foreign exchange reserves' and 'considering the activation of stablecoins' at a seminar held on the 6th.
At this meeting, Kim Byung-wook, chief deputy director, said, 'President Trump's strategic reserve assets for virtual assets will have a significant impact on our country.' Kim Jong-sung, CEO of Excriptone, claimed that 'the Bank of Korea and the Ministry of Economy and Finance should also consider including Bitcoin in the foreign exchange reserves, like the United States.'
Foreign exchange reserves are external payment reserve assets that central banks or governments hold to use at any time to correct balance of payments imbalances or to stabilize foreign exchange markets. They refer to gold and foreign exchange reserves. The reserves are primarily invested in safe assets such as government bonds issued in advanced country currencies, agency bonds, and corporate bonds, as well as stock funds and cash assets.
According to ChosunBiz's reporting, a significant number of domestic experts believe that 'investing in Bitcoin does not align with the primary purpose of foreign exchange reserves.'
Shin Sedon, a professor at Sookmyung Women’s University, stated, 'It's absurd to suggest buying Bitcoin with foreign exchange reserves.' Shin Kwan-ho, a professor at Korea University, noted, 'Assets invested in foreign exchange reserves must be stable,' and added, 'Bitcoin, which has no intrinsic value, is unsuitable.'
Many experts judged that Bitcoin only performs the value storage function among the three functions of money (medium of exchange, measure of value, and store of value). The price of Bitcoin soared from 50 million won in January of last year to 150 million won in January of this year, currently trading around 120 million won.
Lee Boo-hyung, a director at the Hyundai Economic Research Institute, said, 'It's only possible if virtual assets can be used in the global international payment system.' Kim Jeong-sik, an emeritus professor at Yonsei University, also commented, 'It is inappropriate to mention holding Bitcoin, which has high price volatility and illegal elements, through foreign exchange reserves, sovereign wealth funds, or the Korea Investment Corporation (KIC).'
However, there were also opinions that while the U.S. government does not advocate for holding Bitcoin through investment, South Korea also needs to discuss this matter. Trump stated on the 7th that 'strategic reserves of Bitcoin mean holding it without selling the Bitcoin seized by the federal government through crime or confiscation.'
Hah Jun-kyung, a professor at Hanyang University, remarked, 'President Trump is not suggesting that the state assets should purchase Bitcoin additionally,' and added, 'Our country also needs to discuss how to handle seized virtual assets like the U.S.'
◇ 'Quick discussions needed on the definition and regulations of Bitcoin.'
Other experts have also expressed the view that discussions on virtual assets need to continue. Experts pointed out the issue that the current definition of virtual assets is unclear, making it difficult to define laws, regulations, and authorities.
Ahn Dong-hyun, a professor at Seoul National University, explained, 'We have not even properly defined what Bitcoin is yet, so both the law and relevant authorities are ambiguous,' adding, 'The inconsistency of our country's laws and policies, being patchwork, makes it even more challenging.' Kim Jin-il, a professor at Korea University, also stated that 'It needs to be clarified whether Bitcoin is a commodity, currency, or asset first.'
There were also criticisms that our financial authorities' policies are skewed towards regulating and managing virtual assets. Currently, related laws include the 'Specific Financial Information Act' revised in 2021, the first phase of the 'Virtual Asset User Protection Act' enacted last year, and the amendment to the 'Income Tax Act' set to be implemented in 2027. However, these laws are focused solely on the registration system for virtual asset operators, user protection, and regulating unfair trading practices, suggesting that laws addressing the issuance, distribution, industry, and nurturing of virtual assets need to be established.
Yoon Deok-ryong, former research fellow at the Korea Development Institute, stated, 'Due to the inadequacy of legal regulations compared to the advancement of blockchain technology, it's impossible to raise initial capital through ICO (Initial Coin Offering),' and added, 'It is more desirable to employ post-event regulations rather than preemptive ones.'
On the other hand, Shin Sedon emphasized, 'Virtual assets have no substance,' arguing that 'focus should be solely on establishing a systematic foundation to mitigate the risks of virtual asset transactions rather than on ICOs.'