The Czech National Bank (CNB) is considering a pretty bold move: investing up to €7 billion (about $7.31 billion) in Bitcoin. That’s 5% of their total foreign exchange reserves!
A Risky, but Potentially Rewarding, Investment
CNB Governor Aleš Michl, a former investment fund manager, thinks adding Bitcoin to their portfolio would be a good way to diversify. He acknowledges Bitcoin’s volatility and short history, but points to growing institutional interest – like BlackRock launching Bitcoin ETFs – as a positive sign.
He’s not afraid to admit it’s a gamble. He even says Bitcoin could become worthless, but also could skyrocket in value. He compares this risk to other past investment failures, like Enron and Wirecard, arguing that losses are just part of investing. Internal CNB calculations suggest that holding 5% of their reserves in Bitcoin over the past 10 years would have boosted their annual returns by 3.5%, though with double the volatility.
A Controversial Move
Most central banks avoid Bitcoin, preferring safer bets like government bonds. Some central bank officials have even called Bitcoin “digital tulips,” comparing it to a historical speculative bubble. The Federal Reserve, for example, doesn’t own any Bitcoin.
But Michl sees things differently. He’s betting that other central banks might follow suit in the next five years, pointing to pension funds and commercial banks already holding Bitcoin. He even mentions President Trump’s pro-crypto stance and the growing influence of crypto executives in Washington as contributing factors.
More Than Just Bitcoin
The CNB already has a more adventurous investment strategy than most central banks. They currently hold 22% of their reserves in equities (stocks), much higher than the average. Michl plans to increase their US stock holdings even further.
What Happens Next?
The CNB board will vote on Thursday. If approved, the Czech National Bank would be the first major Western central bank to publicly hold Bitcoin, setting a significant precedent. The price of Bitcoin at the time of writing was around $102,817.
