The purchase of cryptocurrency into the reserves of the central bank is being considered by Governor Aleš Michl, but some experts warn against this.
The inauguration of the new American President Donald Trump and the departure of Joe Biden's administration shot bitcoin to record values. The growing interest can be seen in the rising volume of trades on the Czech market. Governor of the Czech National Bank Aleš Michl, also rode this wave when he outlined a plan in a January interview for the British economic daily The Financial Times to purchase this cryptocurrency for reserves for about 175 billion crowns.
Bitcoin is reviving after a series of previous scandals and bankruptcies in the cryptocurrency industry. The turning point was last year's decision by the U.S. Securities and Exchange Commission, which gave approval for the launch of 11 investment funds on spot bitcoins traded on the exchange. Before Donald Trump took office, the cryptocurrency even reached its historical record when its value, according to data from the specialized Bitstamp exchange, exceeded the threshold of 109 thousand dollars, which is approximately 2.7 million crowns in conversion.
Cryptocurrency as a central bank reserve
Bitcoin could ultimately also achieve success in our country. This is according to the governor of the Czech National Bank, Aleš Michl. In his opinion, cryptocurrency is a good means of diversifying the activities of the central bank. Speaking to journalists from The Financial Times, among other things, he said that the goal should be a five percent share of bitcoin in foreign exchange reserves. Given that the bank can currently rely on assets worth 140 billion euros, this would involve bitcoins worth about 175 billion crowns.
"It's an alternative investment for many people,"
Michl explained to the British newspaper. Some analysts consider it a logical step.
"It clearly shows that bitcoin is no longer just a fringe speculation, but a recognised class of assets that cannot be ignored. In times of increasing institutional acceptance and political support, especially from Donald Trump, it confirms its place in a well-diversified investment portfolio,"
said Czech News Agency Rostislav Plachý from Golden Gate.
According to Dopamine Investment fund manager Tomáš Pacalt, considering the size of the Czech state reserves, it could even represent one of the largest bitcoin state reserves in the world proportionately.
The fact that trading with cryptocurrencies is not Cinderella even in the Czech Republic is evidenced by numbers from the past year. According to the company Bit.plus, the total volume of these trades increased by a tenth to 4.2 billion crowns over the past twelve months. The company expects double the trading volume this year.
Large part of experts are against it
Not everyone, however, gives the bitcoin as a reserve for the central bank a chance. For example, Trinity Bank economist Lukáš Kovanda warns that we would end up in conflict with the European Central Bank, which would escalate the moment we adopted the euro.
"According to the European Central Bank, the intrinsic value of bitcoin is zero. It poses a risk to society and the environment, and its still relatively high price is a reflection of manipulations on the unregulated market, a breeding ground for various charlatans. According to it, the price of bitcoin is so high because it increasingly serves criminal activities, it has become the currency of criminals,"
Kovanda stated for the Czech News Agency.
He is also supported by statements from some foreign experts from the past. For example, Michael Sonnenshein, who is the head of the world's largest fund Grayscale, believes that most of the aforementioned investment funds, which can be traded on the stock exchange, will not survive. He estimates that only two or three bitcoin funds will manage to achieve a sufficient volume of assets to function effectively and sustain themselves in the market.
The Governor of the German Bundesbank, Joachim Nagel, compared bitcoin to "digital tulips", referencing the speculative bubble of the 17th century. He probably knows what he is talking about, as only the central banks of Bhutan and El Salvador currently want to keep bitcoins in their reserves. The concept is definitely not being considered in the Western world.
Future developments will show how cryptocurrencies will fare. The trial balloon, which Michl released with his statement, is clear evidence that we must consider bitcoin in our future as well.
Sources: author's article, The Financial Times, ČTK, Bit.plus
