For an individual country, the issuance of domestic debt aimed at  6  BIS Review 128/2009  absorbing excess liquidity from abroad carries a fiscal cost if the domestic interest rate is higher than the return on official reserve assets; furthermore, and perhaps more importantly, the country risks large capital losses if, sooner or later, its currency is revalued.
More generally, large reserve holdings entail a misallocation of resources that could have been more efficiently invested domestically. From a global standpoint, the accumulation of reserves in some countries has been the counterpart of the external deficits run by others, which have been a key co-driver of the crisis, the global recession, and the collapse of world trade.