Czech Finance Minister Raises Concerns Over Bitcoin in Foreign Reserves

Czech Finance Minister Raises Concerns Over Bitcoin in Foreign Reserves

Czech Finance Minister Zbynek Stanjura has expressed reservations about evaluating Bitcoin as a potential asset for the country’s foreign currency reserves. His remarks came in response to a recent statement by Czech National Bank (CNB) Governor Ales Michl, who suggested that the central bank might explore Bitcoin’s role in its investment strategy.

Finance Minister Stanjura Cautions Against Bitcoin Volatility

While acknowledging the CNB’s autonomy in monetary policy decisions, Stanjura emphasized the need to address potential risks. He underscored Bitcoin’s extreme price volatility, arguing that such instability makes it an unsuitable asset for reserve holdings.

Stanjura asserted that the central bank should represent financial stability, a characteristic he believes Bitcoin lacks. His skepticism highlights the broader uncertainty surrounding digital assets in sovereign reserve management.

His warning follows Governor Michl’s recent announcement that the CNB would assess Bitcoin’s investment viability. While no immediate decisions are expected, the bank intends to conduct a comprehensive analysis before considering any potential allocation.

Governor Michl Advocates for Bitcoin Review

Governor Michl has previously emphasized the importance of diversifying the nation’s reserves, with a strategy focused on increasing gold holdings and U.S. stock investments to boost returns. He suggested that Bitcoin’s low correlation with bond prices could make it an asset worth examining.

Despite acknowledging Bitcoin’s volatility, Michl maintained that its market behavior might offer diversification benefits. However, he clarified that the CNB is still in the early stages of evaluating its potential role.

While some reports, including one from the Financial Times, suggested that Bitcoin could eventually account for up to 5% of the country’s reserves, Michl later stressed that discussions remain purely analytical. As of December, the Czech Republic’s foreign reserves stood at approximately $146 billion, ranking among the world’s largest relative to the nation’s economic size.

The debate over Bitcoin’s inclusion aligns with a broader trend of central banks exploring alternative assets, but for now, the CNB remains cautious as it continues its assessment.