The Czech National Bank (CNB) governor, Aleš Michl, believes studying Bitcoin’s technology and economic impact could benefit central banks. Despite past hesitancy due to its volatility, he urges financial institutions to explore it.
Michl advises caution for crypto investors. He recalls the 1990s when the shift from socialism to capitalism led to the rise and fall of many investment funds. Crypto markets may face similar cycles. He warns against investing without understanding the risks, emphasizing that one could lose everything.
However, Bitcoin is unique. It should not be grouped with other cryptocurrencies. Central banks should analyze it, as studying Bitcoin will strengthen them. At the CNB Bank Board meeting on Jan. 30, 2025, Michl proposed a Bitcoin test portfolio.
The aim is to explore its potential, not to make immediate investments. Learning from Bitcoin is essential in adapting to financial market changes and exploring reserve management options. However, Bitcoin remains highly volatile. It could be worth nothing or a significant amount in the future. Michl stresses that it is a high-risk asset suited only for professional investors who fully grasp the risks.
The necessity of understanding Bitcoin’s impact
The Bank Board has approved an analysis of additional asset classes, including BTC. No changes will take place until the study is completed. The findings will determine the next steps. This is only the initial phase. Well, the final decision depends on the results of the analysis and the Bank Board’s judgment. The future role of BTC in CNB’s reserves is uncertain. But ignoring it is not an option.
Nevertheless, if the proposal is approved, the CNB could be the first central bank in Europe to invest in Bitcoin. The investment could be over $7.3 billion, based on CNB’s total reserves of more than $146 billion, says the head of research at Bitwise, André Dragosch.
