In a significant twist, Aleš Michl, the Governor of the Czech National Bank (CNB), is recommending the allocation of billions of euros to Bitcoin. The goal is to diversify the bank’s reserves, potentially making it the first major central bank to officially hold Bitcoin. The step, if endorsed, could imply that the CNB would devote up to 5% of its total assets, amounting to 140 billion euros, to Bitcoin.
Favouring diversity, Michl cited increased institutional appeal in Bitcoin that followed the introduction of BlackRock’s spot Bitcoin ETFs. He also referenced the crypto-friendly attitude of former U.S. President Donald Trump and the growing number of cryptocurrency enthusiasts in his administration. The CNB’s approach already deviates from its counterparts, as it holds 22% of its portfolio in stocks, reflecting a higher risk tolerance.
Though Trump has called for a country-wide framework for cryptocurrency regulation and endorsed the idea of a digital asset reserve, his executive order didn’t specifically mention Bitcoin. This omission illustrates a contrast with Michl’s stance, as other central bankers have dismissed Bitcoin as an unstable store of value.
Officials like Federal Reserve Chair Jerome Powell have stated their reluctance to hold Bitcoin, whereas the European Central Bank has maintained that Bitcoin is inappropriate for payments or investment, as its fair value is zero. Even El Salvador, which made history by accepting Bitcoin as legal tender in 2021, has toned down its progressive pursuit due to a debt relief agreement with the International Monetary Fund.
Despite reservations from conventional financial establishments, Bitcoin’s value has skyrocketed, breaking the $100,000 mark after Trump’s electoral victory. Approval of Michl’s proposal could lead other central banks to follow suit, further validating Bitcoin as a reserve asset. The global finance community is eagerly awaiting to see if the CNB will take this groundbreaking leap.