South Korea’s Financial Services Commission Pauses Plans for National Bitcoin Reserve Amid Rising Domestic Calls

South Korea’s Financial Services Commission (FSC) has decided to put on hold any plans to establish a national Bitcoin reserve, despite increasing domestic calls for the country to secure its position in the growing digital asset space. This cautious stance comes as the U.S. adopts a more favorable approach to cryptocurrency, raising questions about the future of Bitcoin reserves in other global economies.

In an interview with South Korean news outlet Newsprime on November 24, FSC Chairman Kim Byung-hwan addressed the rising debate about the establishment of a Bitcoin reserve. He stated that the idea was “a bit of a distant story at the moment” and emphasized that South Korea would need to take a wait-and-see approach before making any major moves.

Kim acknowledged the shift in the U.S. government’s attitude toward cryptocurrencies under President-elect Donald Trump, who has taken a significantly more supportive stance than previous administrations. He referred to the U.S.'s new policy as an "active nurturing policy" for crypto, contrasting it with the more conservative approach previously adopted by American regulators.

Despite this growing international trend towards embracing digital assets, Kim noted that the South Korean FSC would need more time to closely monitor the evolution of the global cryptocurrency market. He emphasized that the country must carefully observe the actions of other nations, particularly the U.S., before considering any policy shifts regarding Bitcoin reserves.

“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 explained.

Kim also pointed to South Korea’s current focus on strengthening its traditional financial market, rather than pushing further into the volatile world of cryptocurrencies. He noted that while virtual asset trading volumes have surged, even surpassing those of South Korea’s main stock market indices, KOSPI and KOSDAQ, the country’s regulators believe more focus should be placed on directing investment into the stock market.

“The prices of virtual assets are rising rapidly in a short period of time, and the market itself is highly volatile. It is necessary to closely monitor the unfair trading sector,” Kim warned, underlining the FSC's concern over potential market manipulation in the crypto sector.

In addition to caution on Bitcoin reserves, South Korean regulators are taking steps to strengthen oversight of the crypto market. On November 20, the Democratic Party of Korea revealed plans to introduce a 20% tax on cryptocurrency profits starting in January 2025. The proposed tax would apply to profits exceeding 50 million Korean won (approximately $35,668), with an additional 2% local tax. Initially, the government had considered applying the 20% tax to profits above 2.5 million won ($1,800), but this was met with resistance from major crypto exchanges, who argued that such a low threshold would negatively impact trading volumes.

South Korea’s approach to cryptocurrency regulation remains cautious, but its evolving stance indicates that policymakers are paying close attention to global trends while carefully considering the potential risks and rewards of a rapidly changing digital landscape. The decision to delay a national Bitcoin reserve for now reflects the FSC’s desire to maintain control over the evolving market while ensuring the stability of the broader financial system.