Czech Central Bank Eyes Bitcoin for Reserves

In a historic move, Czech National Bank (CNB) Governor Aleš Michl is set to propose adding up to $7 billion worth of Bitcoin to the country’s reserves. If approved, the Czech Republic could become the first Western central bank to hold cryptocurrency as part of its asset portfolio.

“For the diversification of our assets, Bitcoin seems good,” Michl stated in an interview with Financial Times, acknowledging that his stance diverges from the cautious approach of other central bankers.

The proposal aligns with growing institutional interest in Bitcoin, particularly following the launch of spot ETFs by firms like BlackRock. Michl also pointed to U.S. President Donald Trump’s crypto-friendly policies and the rising influence of digital assets in his administration as factors bolstering Bitcoin’s credibility.

A Crypto-Friendly Nation

This isn’t the Czech Republic’s first foray into crypto innovation. Last December, the country passed legislation exempting Bitcoin held for over three years from capital gains tax. Earlier this month, Michl hinted at the possibility of adopting Bitcoin as a foreign exchange reserve, sparking widespread attention.

If the proposal is approved, it would mark a significant step forward for central bank adoption of crypto, a move that most global financial institutions have been hesitant to consider.

A Unique Investment Strategy

The CNB has already established itself as an outlier among central banks with its bold investment strategies. While most central banks stick to government bonds, the CNB allocates 22% of its portfolio to equities, primarily U.S. tech stocks like Apple and Microsoft.

Michl plans to increase this allocation to 30% by 2029, betting on equities to deliver higher returns. This diversified approach, coupled with potential Bitcoin holdings, underscores the CNB’s willingness to challenge traditional central banking norms.

Bitcoin’s Divisive Role in Central Banking

Despite the CNB’s enthusiasm, most central banks remain skeptical of cryptocurrencies:

• The U.S. Federal Reserve confirmed in December that it holds no Bitcoin.
• European Central Bank (ECB) officials last year dismissed Bitcoin’s “fair value” as “still zero,” even as spot Bitcoin ETFs gained traction.

Michl acknowledged the risks associated with Bitcoin, noting its potential to become either “worthless” or achieve “absolutely fantastic value.” However, he emphasized the move is aimed at diversifying the CNB’s reserves rather than speculating on the cryptocurrency’s future price.

“My goal is to diversify the portfolio, so if Bitcoin is good, then let’s have it,” Michl said.

The Eurozone Context

Broader policy changes in the Eurozone are also influencing the financial landscape. Last week, the ECB indicated its readiness for multiple rate cuts in 2025, with ECB President Christine Lagarde signaling a “gradual” approach to monetary easing. Policymakers are expected to approve these cuts by the end of January.

Amid these shifts, Michl’s proposal to include Bitcoin in the Czech Republic’s reserves signals a bold move that could redefine central bank strategies in Europe and beyond.

What’s Next for Bitcoin in Central Banking?

If the Czech National Bank adopts Bitcoin, it could set a precedent for other central banks to follow, especially as digital assets continue to gain traction in institutional portfolios. The move would position the Czech Republic as a trailblazer in integrating cryptocurrency into traditional financial systems, highlighting the evolving role of Bitcoin in global finance.

As the financial world watches closely, Michl’s proposal could either revolutionize reserve management or underscore the risks of venturing into uncharted territory.