The Czech National Bank (CNB) is currently reviewing a proposal to include Bitcoin in its reserves. However, recent reports suggest that the process may take several months, and if implemented, Bitcoin exposure would be significantly lower than the initially suggested 5%.
The idea was first introduced by Governor Aleš Michl in an interview with the Financial Times, sparking discussions in the crypto space. However, the proposal has faced pushback from policymakers, including European Central Bank (ECB) President Christine Lagarde, who emphasized the need for liquidity, security, and stability in central bank reserves.
Ongoing Feasibility Study
Following Michl’s statement, the CNB’s board launched a study to assess Bitcoin’s feasibility as a reserve asset. The governor has stated that he is open to the study’s conclusions, even if they ultimately reject Bitcoin’s inclusion. According to sources cited by Bloomberg, this study could take several months, delaying any final decision.
Even if the study supports Bitcoin purchases, sources indicate that the CNB’s exposure would likely be under 1% of total reserves, far from the earlier discussions suggesting up to 5%.
Bitcoin’s Risk-Reward Analysis
Michl acknowledged that Bitcoin’s value could theoretically drop to zero but also highlighted its potential benefits. CNB data suggests that if 5% of the bank’s reserves had been in Bitcoin over the past decade, annual returns would have increased by 3.5 percentage points. However, this would have also doubled reserve volatility, raising concerns about financial stability.
If the CNB moves forward with the plan, it would become the first Western central bank known to hold Bitcoin, following in the footsteps of El Salvador, which currently holds approximately 6,048 BTC, valued at around $619 million, according to Bitcoin Treasuries.
Conclusion
While the Czech central bank explores Bitcoin as a reserve asset, institutional skepticism and regulatory concerns remain key hurdles. With exposure likely to be minimal, the decision’s impact on broader crypto adoption in traditional banking remains uncertain.
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