The chairman of the Czech National Bank wants to invest billions of Euros of the country's reserves in bitcoin. This would make the institution the first Western central bank to hold cryptocurrencies on its balance sheet.
Governor Aleš Michl plans to present a proposal to the board of directors on Thursday to invest in bitcoin as a way to diversify Česká národní banka's (CNB) reserves. According to the Financial Times, if approved, the CNB could allocate up to 5% of its €140 billion in reserves to bitcoin.
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Bitcoin is unstoppable
Michl acknowledged bitcoin's volatility and limited history, but emphasized its growing investor interest, especially since BlackRock, Fidelity and other firms launched exchange-traded bitcoin ETFs last year. Those funds now manage more than $100 billion in assets.
The CNB chairman also pointed to U.S. President Donald Trump's deregulation promises and the growing influence of crypto executives in his administration. Last week, Trump signed an executive order establishing a task force to explore various initiatives to make the U.S. a "crypto superpower." This includes drafting legislation and exploring the creation of a national crypto reserve. Michl, however, sees bitcoin as a long-term investment for the Czech National Bank.
"For the diversification of our assets, bitcoin seems to be a good fit. These [Trump] people can create a kind of bubble for bitcoin, but I think the trend would rise even without them, because it's an alternative [investment]for more people." - Aleš Michl, Governor of the Czech National Bank, in an interview with FT
Not your typical central banker
In Switzerland, a popular initiative is pushing the Swiss National Bank (SNB) to invest in bitcoin. This follows negative comments from the SNB's leadership. According to Martin Schlegel, Chairman of the Governing Board, bitcoin has little purpose and is too volatile to be used as a means of payment. Most central banks share a similar stance, as bitcoin's core principles challenge their very existence. Michl, however, has a "completely different philosophy." The CNB chief views bitcoin investment from a return-on-investment perspective.
"Compared to other bankers, I'm obviously the one venturing into the jungle, or the pioneer. I used to run a mutual fund, so I'd say I'm a typical investment banker. I like profitability." - Aleš Michl
If the Czech National Bank had invested 5% of its foreign exchange reserves in bitcoin over the past decade, it would have added 3.5 percentage points to its annual return, albeit with roughly twice the volatility. Michl believes more central banks could follow suit in the coming years. Similarly, several funds and commercial banks have recently adjusted their strategies to include crypto assets. From a game theory perspective, it makes sense for major players to get in before their competitors as early adopters of exponential technologies.
