Will the Czech National Bank Buy Bitcoin? A Bold Move into Crypto Reserves

A plan that would allocate up to 5% of the Czech National Bank’s €140 billion ($146 billion) in reserves to bitcoin is being prepared for proposal by Czech National Bank Governor Aleš Michl. This was reported by The Financial Times. Will the Czech National Bank buy Bitcoin? This question has sparked intense debate among financial analysts. The central bank is considering diversifying its holdings.

It was revealed by Michl to the FT that this strategy is intended to be presented to the central bank’s board on Thursday. This is part of an effort to diversify reserve holdings. If approved, the Czech National Bank (CNB) would become the first central bank publicly known to have bitcoin in its portfolio.

Will Bitcoin Become a Reserve Asset for Central Banks?

While Michl acknowledged bitcoin’s volatility and relatively short track record, he also noted the growing institutional interest. Factors such as the launch of U.S. spot bitcoin exchange-traded funds by BlackRock and other major asset managers were cited. Additionally, former President Donald Trump’s campaign promises regarding crypto deregulation and the establishment of a bitcoin strategic reserve were mentioned.

“In terms of asset diversification, bitcoin appears to be a viable option,” it was stated by Michl in the interview. “The potential for a speculative bubble exists, particularly with Trump’s influence. However, it is believed that bitcoin’s trajectory would still be upward even without that factor. It is becoming an alternative investment for a broader audience.”

It was also emphasized by Michl that his perspective on Bitcoin diverges from that of most central bankers. “Compared to my peers, a pioneering approach is being taken by me,” he said. “With an investment banking background, profitability is naturally a primary focus.”

Other Central Banks May Follow Suit

It was suggested by the CNB governor that similar strategies could be considered by other central banks in the coming years. However, he cautioned that bitcoin remains a speculative asset with uncertain long-term value.

“The possible outcomes vary widely—bitcoin could either be worthless or reach an extraordinary valuation,” it was remarked. “Major companies like Enron and Wirecard have collapsed throughout history, so familiarity with high-risk investments exists. The possibility of bitcoin’s value dropping to zero is something I am prepared for.”

According to CNB’s estimates, an allocation of 5% of its foreign reserves to bitcoin over the past decade would have increased annual returns by 3.5%. However, this would have resulted in twice the level of volatility.

Earlier this month, reports surfaced that Michl was exploring bitcoin as a potential reserve asset. However, in an interview with CNN Prime News on January 6, he stated that no concrete plans had been made.

“Bitcoin has been considered as an option, but seven members sit on the board, and discussions remain ongoing,” he said. “For diversification, it is an interesting asset.”

While a small amount of bitcoin was initially mentioned as a potential acquisition, an allocation of 5%, if approved, could result in approximately $7.3 billion worth of the digital asset being purchased. Additionally, the central bank is planning to increase its gold reserves to 5% of total assets by 2028.

This potential bitcoin investment aligns with the evolving stance of the Czech Republic on cryptocurrency. On December 6, legislation exempting bitcoin holdings of more than three years from capital gains tax was unanimously passed by the Czech parliament. The law took effect on January 1. Will the Czech National Bank buy Bitcoin? As the country continues to embrace crypto-friendly policies, this remains a pressing question for global investors.

El Salvador became the first nation to officially hold bitcoin as a government asset in 2021, though