CNB Considers 5% Bitcoin Allocation, Bucking Central Bank Norms

The Czech National Bank (CNB) is considering allocating up to 5% of its €140 billion in foreign exchange reserves to Bitcoin, according to Governor Aleš Michl. This proposal marks a significant departure from traditional asset strategies favored by major central banks.

Michl, who previously worked as an investment fund manager, believes that introducing BTC into the CNB’s portfolio could serve as a viable way to diversify holdings. He acknowledged the cryptocurrency’s extreme volatility and limited track record but pointed to rising institutional interest since global asset managers like BlackRock launched Bitcoin exchange-traded funds last year.

If approved, the CNB could direct as much as 5% of its reserves—equivalent to approximately €7 billion—into Bitcoin. Michl noted that this amount is substantial even for the Bitcoin market. Most central banks around the world have steered clear of BTC, preferring safer instruments such as highly rated government bonds. A few have ventured into equities, but public disclosures of Bitcoin holdings by these institutions remain virtually nonexistent.

Federal Reserve chair Jay Powell confirmed in December that the US central bank does not hold Bitcoin, while comparing it to gold, describing it as a virtual and digital speculative asset. Other top monetary officials in Europe have been notoriously critical. The governor of the Bundesbank, Joachim Nagel, likened Bitcoin to “digital tulips,” referencing the 17th-century speculative bubble. European Central Bank (ECB) officials have similarly argued that the “fair value of Bitcoin is still zero.”

However, Michl struck a distinctly different tone. “I used to run an investment fund, so I’m a typical investment banker, I would say, I like profitability,” he told the FT. He also suggested more central banks might follow suit within the next five years, citing how some pension funds and commercial banks have begun holding BTC in their portfolios.

Michl acknowledges the gamble: “It’s possible to have a big range of outcomes, that Bitcoin will have a value of zero or an absolutely fantastic value.” Yet he also drew attention to the historical examples of failed corporate investments, such as Enron and Wirecard, arguing that underperformance is an inherent risk of portfolio management.

Internal CNB calculations suggest that if the central bank had held 5% of its foreign reserves in BTC over the past decade, its annual returns would