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Czech Central Bank to Allocate Up to 5% of Reserves to Bitcoin

Czech central bank governor proposes a multi-billion euro Bitcoin investment to diversify reserves, a move opposed by many other central banks.

The Czech National Bank’s (CNB) Governor, Aleš Michl, proposed a multi-billion euro investment in Bitcoin. The goal is to diversify the bank’s reserves and potentially establish the CNB as the first major central bank to hold the cryptocurrency officially.

The proposal involves allocating up to 5% of the CNB’s 140 billion euro reserve portfolio to Bitcoin. This represents a significant departure from the traditional investment strategies of most central banks, which predominantly hold stable assets such as government bonds and cash.

Michl Proposal Centers on Current Events

Michl’s rationale centers on “diversification and the increasing institutional interest in Bitcoin,” particularly following the launch of spot Bitcoin ETFs by firms like BlackRock.

However, he acknowledges Bitcoin’s inherent volatility and relatively short history but emphasizes its growing acceptance within the financial landscape. Moreover, the proposal aligns with the CNB’s existing unconventional investment approach, evidenced by its current 22% equity holdings, which demonstrate a higher risk tolerance than many of its global counterparts.

Michl’s view contrasts sharply with the prevailing sentiment among other central bankers, including the Federal Reserve Chair Jerome Powell and the European Central Bank, who have expressed skepticism or outright rejection of Bitcoin as a reliable store of value.

Bitcoin Adoption Pattern

The proposal’s timing is noteworthy, coinciding with a period of significant growth in Bitcoin’s value. Following the election of U.S. President Donald Trump, whose pro-crypto stance is well-documented, Bitcoin reached record highs, exceeding $100,000.

Bitcoin significantly outperformed major stock indices in 2024. While Trump’s executive order on crypto regulation is relevant, it did not explicitly mention Bitcoin.

However, firms like MicroStrategy recently bought more Bitcoin, adding billions of dollars worth to their holdings. This brings their total to over 471,000 BTC, which cost roughly $30.4 billion.

Notably, this makes them the world’s largest corporate Bitcoin holder. Their latest purchase was 10,107 Bitcoin at an average price of $105,596 each, marking twelve consecutive weeks of Bitcoin purchases.

Conversely, El Salvador’s earlier adoption of Bitcoin as legal tender has faced setbacks due to its economic implications and subsequent IMF-mandated debt relief measures.

Michl’s proposal is slated for presentation to the CNB board. Approval would mark a historic milestone in crypto adoption and potentially set a precedent for other central banks, legitimizing Bitcoin as a viable reserve asset.

Sampson Gideon