South Korean FSC puts plans to create a Bitcoin reserve on hold “for the time being”

South Korea’s Financial Services Commission (FSC) has dismissed the idea of creating a national Bitcoin reserve “for the time being,” despite growing domestic calls for such a move. In an interview on November 24, FSC Chairman Kim Byung-hwan responded to the increasing pressure for South Korea to start building a Bitcoin reserve to ensure the liquidity of digital assets. He described the notion of a national Bitcoin reserve as “a bit of a distant story at the moment,” suggesting that it remains a distant possibility for the time being.

Kim acknowledged the more pro-crypto stance of the U.S. government under President-elect Donald Trump compared to the previous administration, which had been more conservative. He referred to the U.S.’s approach as an “active nurturing policy” for digital assets. However, despite recognizing the shift in U.S. policy, Kim emphasized that South Korea’s FSC would need more time to closely monitor the digital asset trading sector and observe how other countries, particularly the U.S., move forward with embracing cryptocurrencies.

“We will have to see what the U.S. does, but it is a bit far-fetched at the moment. For now, the priority is how to connect this market to the existing financial system and establish a relationship with it,” Kim stated. He added that South Korea’s focus should be on integrating the crypto market into the broader financial system rather than rushing into significant investments like a national Bitcoin reserve.

In his interview, Kim also expressed concern over the rapid rise in virtual asset trading volumes, noting that crypto markets had recently surpassed the volume of South Korea’s local stock market indexes (KOSPI and KOSDAQ). He cautioned about the risks of this rapid price increase in a short period, highlighting the highly volatile nature of the crypto market. Kim stressed the need for regulators to closely monitor the market for unfair trading practices, indicating that while there is strong interest in digital assets, the market’s volatility requires careful oversight.

On the regulatory front, South Korea has been taking steps to secure the crypto market. Most recently, on November 20, the Democratic Party of Korea announced plans to introduce a 20% cryptocurrency tax starting in January 2025. This tax would apply to profits exceeding 50 million Korean won (about $35,668), with an additional 2% local tax on those profits. Initially, the tax was proposed to apply to profits above 2.5 million won ($1,800), but major crypto exchanges pushed back, arguing that such a tax structure could lead to a sharp decline in trading volumes.

Overall, while South Korea is actively evaluating the role of digital assets in its economy, it remains cautious about adopting measures like a Bitcoin reserve and is focused on integrating the crypto market with the traditional financial system and ensuring fair and stable trading practices.