Should Bitcoin and stablecoins be included in foreign exchange reserves? Yang Chin-lung: The central bank’s stance remains unchanged, but time and circumstances will change

By Ariel, Crypto City

Legislator pushes once again for Bitcoin and stablecoins to be included in Taiwan’s foreign exchange reserves Yesterday, Legislator Ko Ju-chun questioned the governor of the Central Bank of the Republic of China, Yang Chin-lung, and once again brought up whether Bitcoin and stablecoins could be allowed to become a small portion of Taiwan’s foreign exchange reserves. He believes that Taiwan is in a special geopolitical environment and may face extreme scenarios in the future, such as maritime blockades or full-scale invasion. In such situations, compared with traditional U.S. dollars and gold, Bitcoin has the characteristics of being fully accessible, sovereignly independent, and spendable. Taking into account that the central bank may have concerns about Bitcoin’s price volatility and liquidity risks, Ko Ju-chun further suggested that the government could start with stablecoins, which are relatively more stable in price and have higher liquidity, and said they offer advantages such as convenient cross-border circulation, fast transfer speed, and the ability to operate instantly in a digital environment. Ko Ju-chun argues that the government should take a risk-diversification approach, carefully assess the feasibility of using stablecoins as a small part of a strategic reserve tool, and thereby build innovative thinking for future risks.

Image source: Ko Ju-chun’s Threads ｜ Legislator Ko Ju-chun brings up Bitcoin and stablecoins again for inclusion in Taiwan’s foreign exchange reserves

Yang Chin-lung: The current stance remains unchanged, but times and circumstances will change In response to Ko Ju-chun’s proposal, Central Bank Governor Yang Chin-lung replied during the interpellation that the central bank would consider Bitcoin and stablecoins together. However, regarding the attitude toward using both as a small part of strategic reserves for foreign exchange, the stance has not changed so far. The conclusion of the central bank’s report last year was that Bitcoin is currently not suitable to be used as a reserve asset for Taiwan’s central bank. Even though it has potential advantages such as portability in wartime scenarios, concerns remain about its sharp price volatility, liquidity risks, cybersecurity and custody risks, as well as an immature regulatory framework. Although he maintains the existing position, Yang Chin-lung also added that “times and circumstances will change,” and when the situation changes, the central bank’s decisions must also make the necessary adjustments. Judging solely from the context of the interpellation’s content, these remarks lean toward conservative language that favors an open-ended adjustment, and at this stage the central bank’s willingness to purchase crypto assets as reserves is still quite low.

Central bank assessment report establishes stablecoin payment-type model On the discussion of stablecoins, last year the central bank also issued a report categorizing stablecoins into three major types based on the source of the collateral assets: “those collateralized by high-quality assets,” “those collateralized by crypto assets,” and “unsecured algorithmic types.” The central bank defines stablecoins as “the digital evolution of a payment-type stored-value medium that is similar in nature to existing electronic payment systems,” and believes that the demand to denominate stablecoins in Taiwan’s new dollars within the crypto market is still small. As a result, the impact of stablecoin issuance on the domestic payment system and the supply of money is limited. If stablecoins backed by the Taiwan dollar are opened in the future, they would be handled in the same way—by requiring electronic payment providers to set aside reserves.

Global central banks take a conservative stance; Ko Ju-chun says it may be hard to proceed in the short term The central bank’s report last year also mentioned that globally, as many as 93% of central banks have no intention of holding digital assets, including international organizations such as the European Central Bank and the U.S. Federal Reserve, all of which take a conservative stance toward reserve Bitcoin. Most opinions hold that Bitcoin lacks intrinsic value and, at this stage, cannot fulfill the role of a central bank reserve asset. Taiwan currently has accumulated 210.45 BTC seized through criminal investigations, with a total market value of about $18.0 million. Although this would place Taiwan among the world’s top 10 government holders of Bitcoin, all of these assets come from the seizure of financial crimes and illegal cases. The Ministry of Justice has not yet announced whether it will convert or retain the seized Bitcoin, and it has also not yet established a plan to incorporate them into national strategic reserves. In the absence of concrete precedents internationally, and given that Taiwan’s central bank is clearly conservative, lawmakers’ proposal to include Bitcoin or stablecoins in official foreign exchange reserves is unlikely to materialize in the short term. And the claim that “times and circumstances will change” is only conservative talk favoring an open-ended adjustment. The dream of using Bitcoin and stablecoins as Taiwan’s strategic reserves still needs to return to the fundamentals of foreign exchange reserves, the central bank’s core responsibilities, and the suitability of international cases for evaluation—see whether it will become a “plus factor” for the national financial system, or a misunderstood technology narrative.