Czech National Bank Plans for 5% Reserve Allocation to Bitcoin

Governor Aleš Michl of the Czech National Bank (CNB) revealed its plans to establish a Bitcoin Reserve by purchasing billions of Euros worth of BTC. This move comes as the Donald Trump administration is mulling the creation of a strategic Bitcoin reserve. Michl has submitted a comprehensive proposal to the central bank, outlining how Bitcoin investments could help diversify the CNB’s reserves.

Bitcoin Reserve Bug Hits Czech National Bank

Governor Aleš Michl of Czech National Bank has presented a plan to the board explaining how Bitcoin reserves could be a game-changer moving ahead. His plan suggests that the Czech National Bank should have at least 5 percent of the total €140bn of reserves in BTC. This could mean a massive 7 billion euro inflow coming from just one European bank.

Furthermore, he also pointed out Donald Trump’s actions on de-regulation and his recent issuance of an executive order to build a digital asset stockpile. The plan of US Bitcoin Reserve seems to have inspired other market players to follow a similar path. Speaking to the Financial Times, Czech National Bank Governor Aleš Michl said:

“For the diversification of our assets, Bitcoin seems good. 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 acknowledged Bitcoin’s “extreme volatility” and relatively short track record but noted growing investor interest. He also highlighted how giants like BlackRock along with other firms have come up with regulated Bitcoin ETFs, which recorded massive success in 2024. However, Michl said that the board would be doing a “thoughtful analysis” on this matter. In his message on the X platform, Michl noted:

“An asset under consideration is Bitcoin. It currently has zero correlation to bonds and is an interesting asset for a large portfolio. Worth considering. Right now, it’s only at the stage of analysis and discussion. The Bank Board decides, and no decision is imminent. Thoughtful analysis is needed”.

Taking a Contrarian Approach From the US Fed

Last month in December, US Fed Chair Jerome Powell stated that the central bank wasn’t building its Bitcoin reserve as Congress hadn’t approved this yet. “We are not looking for a law change at the Fed,” Powell said.

So far, central banks have held reserves into safe assets like US Treasuries and bonds. Also, none of the central banks declared Bitcoin purchases yet. Czech National Bank Governor stated that his perspective on Bitcoin differs significantly from that of his counterparts. He added:

“Of course, if you compare my position with other bankers, then I’m the one entering the jungle, or the pioneer. I used to run an investment fund, so I’m a typical investment banker I would say, I like profitability.”

According to the Czech National Bank (CNB), holding 5% of its foreign reserves in Bitcoin over the past decade would have boosted annual returns by 3.5 percentage points but also doubled volatility. Michl noted that any substantial investment by a central bank in a Bitcoin ETF could influence the BTC price. “Five per cent [of our assets] is a lot of money, even for the bitcoin market,” he said.

Bitcoin Drops As Market Awaits Fed Decision

As of press time, the Bitcoin price is trading 1.15% down at $102,123.82 with the daily trading volume dropping 47% to $42.84 billion. Meanwhile, volatility is witnessed in the derivatives market due to the upcoming crypto market expiry on Friday.

The FOMC meeting ahead on Wednesday will play a crucial role in deciding the next BTC price trajectory, as analysts predict a dovish Fed stand. Investors are moving money to safe-haven assets amid uncertainty in the markets.