Czech National Bank (CNB) Governor Aleš Michl is set to propose a groundbreaking strategy to allocate up to 5% of the bank’s reserves into Bitcoin, potentially amounting to over $7 billion. This proposal will be presented at the CNB’s Board of Directors meeting scheduled for January 30, 2025.
Having taken office amid soaring inflation rates of 17.5% in July 2022, Michl successfully guided the CNB to achieve its inflation target of 2% by June 2023. His tenure has been marked by a focus on stabilizing prices and diversifying the bank’s asset portfolio. The current proposal to include Bitcoin as a reserve asset is part of a broader strategy to enhance the CNB’s foreign exchange reserves, which exceed €146 billion.
Michl emphasized the importance of thoughtful analysis before any final decision is made regarding Bitcoin. While he acknowledges the cryptocurrency’s significant volatility, he believes its low correlation with traditional assets like bonds makes it an intriguing option for diversification. “For diversifying our assets, Bitcoin seems good,” Michl stated, noting that institutional interest in cryptocurrencies has been on the rise.
If approved, this move could position the Czech Republic as a pioneer among Western central banks in embracing cryptocurrency as a reserve asset. The proposed investment would represent approximately 5.3 months of newly mined Bitcoin supply, according to André Dragosch, head of research at Bitwise.
While some analysts view this initiative positively, caution remains due to Bitcoin’s unpredictable nature. Michl himself has acknowledged the risks associated with such investments, drawing parallels with past financial disasters like Enron. “It’s possible to have a big range of outcomes,” he remarked, indicating readiness for both potential gains and losses.
As the CNB prepares for this pivotal decision, the implications for both national monetary policy and the broader cryptocurrency market are significant and warrant close attention.
