'I like profitability': Czech central bank chief proposes allocating up to 5% of reserves to bitcoin: FT

Czech National Bank Governor Aleš Michl is set to submit a plan to allocate as much as 5% of its €140 billion ($146 billion) of reserves to bitcoin, according to The Financial Times.

Michl told the FT he will present the bitcoin investment plan to the central bank’s board on Thursday to diversify its reserves. If approved, the CNB would become the first central bank known to hold the foremost cryptocurrency.

The governor acknowledged bitcoin’s volatility and limited record but highlighted increased investor interest since BlackRock and other asset managers launched U.S. spot Bitcoin exchange-traded funds and President Trump’s campaign pledges on crypto deregulation and the creation of a bitcoin strategic stockpile.

“For the diversification of our assets, bitcoin seems good,” Michl told the FT in an interview. “Those [Trump] guys can now kind of create some bubble for bitcoin, but I think the trend would be an increase without those guys as well, because it’s an alternative [investment] for more people.”

Michl noted he had a “totally different philosophy” on bitcoin compared to most of his counterparts. “Of course, if you compare my position with other bankers, then I’m the one entering the jungle, or the pioneer,” Michl told the outlet. “I used to run an investment fund, so I’m a typical investment banker I would say, I like profitability.”

More central banks could follow

The CNB chief added that more central banks could follow his lead over the next five years, but also warned that the investment could end up proving worthless.

“It’s possible to have a big range of outcomes, that bitcoin will have a value of zero or an absolutely fantastic value . . . but in our history we have also had some stocks like Enron or the payment company Wirecard, so we have some experience with bad investments, so, yes, I’m ready [for a possible bitcoin collapse],” he said.

The CNB estimated that holding 5% of its foreign reserves in bitcoin over the past decade would have boosted annual returns by 3.5% but also doubled their volatility.

Escalating plans

The news follows reports earlier this month that Michl was considering bitcoin for potential reserve asset allocation. However, speaking with local media company CNN Prime News on Jan. 6, the central bank chief said there were no concrete plans to acquire cryptocurrency.

"Sure, I consider bitcoin, but there are seven of us on the board," Michl said at the time, adding that discussions would continue. "Bitcoin is an interesting option for diversification against other assets."

"I was thinking of acquiring just a few bitcoin, but I never intended to make a significant investment," Michl added. 

However, if his plan is approved, the potential 5% allocation could see as much as $7.3 billion worth of the digital asset acquired. The bank also plans to increase its gold reserves to approximately 5% of total assets by 2028.

The CNB’s potential bitcoin allocation marks the latest step in the country’s increasingly crypto-friendly stance, following a proposed law to exempt bitcoin holdings of over three years from capital gains tax. The legislation, which was unanimously approved by the Czech parliament on Dec. 6, is currently waiting to be signed by the President.

In 2021, El Salvador became the first country to roll out an official bitcoin treasury program, though the funds are held by the government, and managed by a state development bank rather than its central bank. President Trump also issued an executive order last week establishing a task force to explore a strategic digital asset reserve in the U.S.

"The U.S. Executive Order to create a team to focus on their Strategic Bitcoin Reserve was always likely to trigger other nations to act accordingly," Danny Scott, CEO of bitcoin exchange CoinCorner, told The Block. "I have no doubt that we'll see more countries look to explore this in the coming months as they potentially race to beat the U.S. with their 6-month timeline. Nation-state adoption will expedite Bitcoin adoption around the world, adding to its legitimacy and public confidence."

Updated with comments from CoinCorner CEO Danny Scott. Corrected to note that the capital gains tax exemption is still waiting to be signed by the Czech President.