Czech National Bank To Invest 5% Of Reserves In Bitcoin

Czech National Bank Wants To Invest 5% Of Reserves In Bitcoin

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Updated: 29 January 2025

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Czech National Bank (CNB) Governor Aleš Michl has proposed allocating 5% of the bank’s 140 billion euro reserves to Bitcoin.

Governor Michl will present a proposal to the board on Thursday to invest in Bitcoin as a strategy to diversify the CNB’s reserves, according to a report by the Financial Times.

Despite Bitcoin’s “extreme volatility and limited track record,” Michl said investors’ growing interest in Bitcoin fueled his decision to diversify CNB’s reserves with the king of cryptos. He pointed out that last year, BlackRock and other firms launched Bitcoin ETFs (exchange-traded funds), sparking increased attention in the cryptocurrency.

Czech National Bank’s goal is price stability. When we took office in July 2022, inflation was 17.5%. We brought it down to target. We are also diversifying reserves—gradually increasing gold holdings from 0% to around 5% and planning for 30% in equities. An asset under… https://t.co/Au7fwJVHEU

— Aleš Michl (@MICHLiq_) January 29, 2025

He also highlighted US President Donald Trump’s efforts on deregulation, including his recent executive order to establish a digital asset stockpile.

“Those [Trump] guys can now kind of create some bubble for bitcoin, but I think the trend would be an increase without those guys as well, because it’s an alternative [investment] for more people,” Michl said in an interview with the FT.

Michl Calls Himself A “Pioneer” In Bitcoin Investment

Central banks have typically kept their reserves in safe assets like US Treasuries and other top-rated bonds. While some invest in equities, very few have publicly explored the crypto space.

Some central bankers remain skeptical about digital assets. The governor of Germany’s Bundesbank, Joachim Nagel, warned about the risks of investing in crypto. He compared Bitcoin to “digital tulips,” referencing a 17th-century speculative bubble and the subsequent collapse in the price of bulbs.

But Michl said that his approach is different from his counterparts:

“If you compare my position with other bankers, I’m the one entering the jungle, the pioneer,” he said, adding that as someone who used to run an investment fund, he’s “a typical investment banker who values profitability.”

He also added that more central banks could follow his strategy within the next five years, as several funds and commercial banks have recently included crypto in their portfolios. Some pension funds have already started investing in cryptocurrency, too.

He is also aware of the potential risks of investing in Bitcoin.

“Yes, I’m ready for a possible Bitcoin collapse,” he said. “My goal is to diversify the portfolio, so if Bitcoin is a good option for that, then let’s include it.”

According to the CNB, if the Czech bank had held 5% of its foreign reserves in Bitcoin over the past decade, its annual returns would have increased by 3.5 percentage points. But the volatility of its portfolio would have also doubled.

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