CNB's Historic Bet: €7 Billion Bitcoin Allocation Looms

The Czech National Bank (CNB) is set to make a historic decision on Thursday, as it considers allocating up to 5% of its €140 billion in foreign exchange reserves to Bitcoin. This move, if approved, would amount to roughly €7 billion (approximately $7.31 billion), marking a significant departure from traditional asset strategies typically favored by major central banks.

Governor Aleš Michl, who previously worked as an investment fund manager, has expressed his conviction 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.

Should the board approve the plan, the CNB could direct as much as 5% of its reserves—equivalent to approximately €7 billion—into Bitcoin. Michl noted that “five percent [of our assets] is a lot of money, even for the Bitcoin market,” underscoring the potential impact of a sizable BTC purchase by a sovereign authority.

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 (except for El Salvador) 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 Financial Times. 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