Czech central bank to consider holding bitcoin as reserve asset

(Reuters) -The Czech National Bank will consider holding billions of dollars worth of bitcoin in its reserves, Governor Ales Michl said on Wednesday, potentially the first shift into the cryptocurrency by a western central bank if it went ahead.

Michl said the idea was still under analysis and no immediate decision was forthcoming.

Central banks traditionally park reserves in more conservative assets and some have warned about the risks of using cryptocurrencies in public coffers.

Since taking the helm of the Czech central bank in 2022, Michl has led a drive to diversify the bank's hefty reserves through the gradual gold purchases and shifting a bigger share of the portfolio into equities to create sustained profits.

He plans to present the consideration of including bitcoin to the bank's seven-strong board on Thursday, he told the Financial Times in an interview published on Wednesday.

If approved, the bank could eventually hold as much as 5% of its 140 billion euro ($146 billion) reserves in bitcoin, he said.

In a later post on X, Michl added more analysis and discussion was still needed before any decision.

"No decision is imminent," he said. "Bitcoin has significant volatility, which makes it harder to take advantage of its current low correlation with other assets.

"That's why I will ask our team on Thursday to further assess Bitcoin’s potential role in our reserves. Nothing more, nothing less."

Separately Michl told the FT it was "very likely" the bank would cut interest rates by 25 basis points next week, resuming an easing drive paused in December.

In the FT story, former investment fund manager Michl said investment in bitcoin could prove to be worthless or it could have an "absolutely fantastic value".

He said bitcoin would trend higher even without the backing of U.S. President Donald Trump since it is an alternative investment for many people.

Bitcoin hit a record high earlier this month when Trump, who has pledged to be a "crypto president", was sworn in.

Trump last week ordered the creation of a cryptocurrency working group to draft new regulations and explore the possibility of creating a national crypto stockpile.

Bitcoin has more than doubled in value in 2024.

Michl, too, highlighted wider investor interest in bitcoin since BlackRock and other firms last year launched bitcoin exchange traded funds, according to the FT.

Swiss cryptocurrency advocates recently launched an initiative to make the Swiss National Bank hold bitcoin and gold in its reserves. The SNB has expressed skepticism about holding bitcoin as a reserve.

European Central Bank policymakers, too, have been adamant they don't see bitcoin as a possible reserve asset and occasionally compare it to tulip bulbs during a 17th-century trading mania in the Netherlands.

In an opinion piece published this month, two ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB advisers said Bitcoin was too opaque, risky and concentrated for the public coffers and that it was a "speculative bubble that will burst".

South Africa’s central bank governor also criticized the idea of a bitcoin stockpile on a Davos panel last week, saying that crypto industry lobbyists should not influence which assets governments hold.

($1 = 0.9580 euros)

(Reporting by Harshita Meenaktshi in Bengaluru and Jason Hovet in Prague; additional reporting by Elizabeth Howcroft, Francesco Canepa, Dave Graham and John Revill; Editing by Jamie Freed, Kim Coghill and Toby Chopra)