Governor Aleš Michl has come up with a radical proposal for the Czech National Bank, which may invest as much as 5% of its reserves in Bitcoin-a first in history.
Historical Proposal of Czech National Bank
The Governor of the Czech National Bank, Aleš Michl, has just unveiled an ambitious plan that will make Bitcoin a part of the country’s financial reserves. If the CNB board approves the plan, it will invest as much as 5% of its €140 billion reserves in the cryptocurrency-a first among Western central banks.
Michl plans to make his pitch on January 30, highlighting that Bitcoin represents a good diversification opportunity for the assets held by the bank. He told the Financial Times that the cryptocurrency was a “good diversification option” despite the substantial volatility it exhibited.
Bitcoin as a Diversification Strategy
The governor pointed to the growing acceptance of them by investors, especially after BlackRock launched Bitcoin exchange-traded funds in 2024. According to Michl, this reflects a growing confidence in the digital asset’s viability.
“Of course, if you compare my position with other bankers, I’m the one entering the jungle, or the pioneer,” Michl said, underlining how unusual a proposition this might be. A former fund manager himself who managed investment funds, he talks strongly about profitable businesses and who manages risk there.
Assessing Risks and Rewards
Michl acknowledged the wild value swings of Bitcoin are risky. But he highlighted the rewards. CNB estimates that if 5% of its reserves had been invested in Bitcoin in the last ten years, the annual return could have risen by 3.5 percentage points. In return, though, the volatility of the reserve portfolio would double.
A Pioneering Step
If the Michl proposal gets approved, CNB would be the first Western central bank to have Bitcoin as part of its reserves. This puts it in a class with El Salvador, which is currently holding more than 6,000 BTC worth about €570 million.
Broader Implications
The move by Michl comes at a time when other countries, including the U.S., are considering ways through which they can adopt digital assets. Although the U.S. has created a working group to review cryptocurrencies, it has not gone the extra mile of adding Bitcoin to its federal reserves.
If CNB eventually adopts Bitcoin, that could potentially open a window for other central banks to consider cryptocurrencies in their financial operations, further mainstreaming digital assets globally.
