Czech National Bank Chief Proposes Bitcoin Investment for State Reserves

The board of directors of the Czech National Bank (CNB) is set to consider diversifying the state reserve by investing in Bitcoin. This initiative was proposed by the head of the regulator, Aleš Michl, according to the Financial Times.

He suggests allocating up to 5% of the €140 billion reserves into the leading cryptocurrency, acknowledging the growing global interest in the asset:

“My goal is to diversify the portfolio, so if Bitcoin is good [for this], then let’s take it.”

Michl stated that he has a “completely different philosophy” regarding digital gold compared to his conservative colleagues.

“If you compare my view with other bankers, I am a jungle explorer or pioneer. I used to manage an investment fund, so I am a typical investment banker. I would say, I like profitability,” noted the CNB head.

However, he did not rule out the possibility that investments in cryptocurrency could prove futile.

“A wide range of outcomes is possible depending on whether Bitcoin will have zero or absolutely fantastic value. But in our history, we have already had Enron and Wirecard, so we have some experience with bad investments. Therefore, I am ready [for the possible collapse of Bitcoin],” said Michl.

According to the regulator’s calculations, if CNB had held 5% of its foreign exchange reserves in Bitcoin over the last decade, its annual return would have increased by 3.5 percentage points with a doubling of volatility.

Michl mentioned that any significant central bank investments in Bitcoin ETFs could, in themselves, affect the coin’s price.

“5% [of our assets] is a lot of money, even for the Bitcoin market,” he said.

The Czech National Bank’s foreign exchange reserves amounting to €140 billion are equivalent to approximately 45% of the country’s GDP. 22% of the CNB’s portfolio consists of equities, and Michl wants about half of them to be in U.S. stocks in roughly three years.

In February 2024, experts from the ECB stated that the fair value of Bitcoin remains zero, despite the approval of spot Bitcoin ETFs in the U.S. and the preceding price rally.

Meanwhile, former German Finance Minister Christian Lindner believes that European central banks should encourage the inclusion of crypto assets in their reserves, following the example of the U.S..