Czech National Bank May Invest Billions of Euros in Bitcoin
Date: 2025-01-29 Author: Henry Casey Categories: IN WORLD
The head of the Czech National Bank (CNB), Aleš Michl, said in an interview with the Financial Times that he will submit a proposal to the board of directors on January 30 to invest a significant amount in Bitcoin. If the initiative is approved, the CNB will become the first Western central bank to include the cryptocurrency in its reserves.
Michl proposed allocating up to 5% of the bank’s total reserves, which amount to €140 billion, to purchase Bitcoin. He believes that this will allow for diversification of assets, although he admits that the cryptocurrency remains volatile and is associated with high risks.
“The outcome could be either: Bitcoin could depreciate or become an asset with a phenomenal value. However, we know examples of unsuccessful investments, such as Enron or Wirecard. It is important to be aware of the risks, but at the same time take into account the diversification potential,” Michl emphasized.
He also expressed confidence that other central banks could follow his example in the coming years. According to him, his approach to Bitcoin differs from the views of most of his colleagues, and he considers himself a pioneer in this matter.
However, there are still many skeptics in Europe. For example, the head of the Bundesbank, Joachim Nagel, compared Bitcoin to "digital tulips", referring to the speculative bubble of the 17th century. The European Central Bank has previously stated that the fair value of Bitcoin is zero and it is not suitable as a means of payment or an investment asset.
The CNB has already invested 22% of its reserves in stocks. The bank's analysis shows that if 5% of assets were invested in Bitcoin over the past 10 years, the average annual return would have increased by 3.5 percentage points. However, potential risks would also increase.
Discussions about including cryptocurrencies in national reserves intensified after Donald Trump's statements about his intention to create a similar fund in the United States. The new president signed a decree to form a working group to study this issue.
Mikhl noted that the actions of the American administration could affect the price of Bitcoin, but the growth of the crypto market will continue regardless of US policy:
“They may create a bubble around Bitcoin, but the demand for it will grow regardless of this, because cryptocurrency is becoming an alternative asset for an increasing number of investors,” he said.
