Interview with Aleš Michl, Governor
By Levente Koroes (Central Banking 25. 11. 2025)
The governor of the Czech National Bank (CNB) says the aim of its new “experimental” digital asset portfolio is help it learn about digital assets from experience, rather than relying on simulated models.
Aleš Michl tells Central Banking that to get “real learning” about the blockchain and tokenisation, the CNB is not looking to “simulate reality”, but to “touch it”.
He adds that “vision without iteration is just a slogan – real artists ship”.
The CNB announced its decision in a press release on Nov 13, in which it said the $1 million test portfolio would not be “actively increased”. It did not detail the portfolio’s exact composition, but said it would comprise bitcoin, dollar-denominated stablecoins and a “tokenised deposits on the blockchain”.
“The portfolio was purchased in a market operation as part of the CNB’s standard financial activities outside the international reserves,” the bank said. It added that its “marginal size” meant it would not affect the financial performance of the CNB’s broader portfolio of assets.
Michl explains that the bank picked bitcoin as it was “similar to gold” in that it had “historically shown low correlation with other assets”. He adds that there were not many assets “suitable” for diversifying a large portfolio.
“In recent years, its [bitcoin’s] volatility has been comparable to that of major tech equities like Nvidia, Meta and Tesla,” he says, adding that the cryptocurrency’s value “could plausibly end up at two extremes – very high or zero”.
The CNB said it had made the “purchases” on October 30. At the time, the spot price of bitcoin was $110,670.
When asked whether, after a successful test, the bank would hold bitcoin in its reserves portfolio in the future, Michl says he “honestly” does not know. For now, he says the CNB is looking to learn and then scale.
He adds that bitcoin’s advantage is its low correlation with other assets, and that such a factor made it a good fit for a “large portfolio”. Michl cautions that the cryptocurrency lacks gold’s long history.
“Our internal backtests suggest that, had the CNB held 5% of reserves in bitcoin over the past 10 years, expected annual returns would have risen by about 3.5 percentage points, while overall portfolio volatility would have roughly doubled,” the governor says. He adds that over the last five years, bitcoin has offered a more favourable risk-return profile than equities.
“If the board ever sought higher expected returns, our analysis indicates that adding around 2.5% in a bitcoin ETF [exchange-traded fund] would have been more efficient than increasing equities in our US portfolio from 38% to 50%,” he says. “The increase in expected return would have been similar, but the increase in volatility would have been much smaller with 2.5% in a bitcoin ETF. Still, these tests are backward-looking. Bitcoin’s history is short and its characteristics can change.”
Michl adds that he has always been a “strong supporter” of the Czech koruna, and “we can also build financial innovation on it”. He says it is “realistic that, in the future, people will be able to buy a tokenised Czech government bond for koruna as easily as buying a coffee – one tap for payments, another for savings”.
In its press release, the bank explained that it had also launched a ‘lab innovation hub’. This has been tasked with testing “technologies and trends that may affect the functioning of the financial market and the conduct of monetary policy in the future”, including blockchain solutions, artificial intelligence tools and payment innovations.
“The idea is to gain hands-on experience, build professional capacity and be as well prepared as possible for what the future will bring,” Michl was quoted as saying. He added that he had come up with the “idea of creating a test portfolio” in January with the aim of testing “decentralised bitcoin from the central bank’s perspective”. The CNB’s board had then decided to have additional assets analysed, such as stablecoins and tokenised deposits.
“We will inform the public about our experience on an ongoing basis and present an overall assessment of the project in approximately two to three years,” he said.
The CNB said it wanted to gain “practical experience” with blockchain-based technologies, which could “fundamentally affect the operation of the financial and payment system in the future”.
It said it was looking to test the “whole chain of processes associated with the purchase, holding and management of digital assets – from technical administration of keys and multi-level approval processes, through crisis scenarios and security mechanisms, to verifying [anti-money laundering] compliance”.
The bank added that it would look to use and settle the various digital assets in trading, record them in its accounts and audit its holdings, while giving CNB staff the necessary know-how to handle these assets.
“The digital assets in the test portfolio are separated from the international reserves and do not in any way affect the CNB’s ability to conduct potential foreign exchange interventions or direct monetary policy,” the bank clarified.
Michl first floated the idea of adding bitcoin to reserves in early January, when he told a television station that the CNB had “considered” this option. At the time, bitcoin was trading at $98,355. Later that month he told the Financial Times he was considering investing as much as 5% of the bank’s reserves into bitcoin. By this time, the cryptocurrency’s value had climbed to $109,995.
On February 10, when bitcoin dipped to $96,932, Central Banking reported that Michl had made the comment without consulting central bank staff – an allegation he denied without providing details. Instead, the CNB said it would look at investing in “additional asset classes”.
The crypto industry has enjoyed favourable treatment from US president Donald Trump’s administration and bitcoin peaked at $124,310 on October 7.
Hurdles
Alongside the announcement, the CNB published a chapter of an analysis its staff had been working on over the previous nine months. The 50-page publication focuses on the technical aspects of procuring, holding and trading bitcoin, and the challenges that could arise.
It explains that executing a bitcoin transaction is irreversible. The risk associated with the loss or abuse of the private key used to access the wallet holding the cryptocurrency is therefore “incomparable to any other risks the CNB currently faces”.
The study examines options for self-custody via software wallets, USB tokens and hardware security modules. It rules out the first option and says either a multi-party signature or a multi-party computation process in a hardware security module would be “best practice”. In such a case, the multi-party orchestrator would oversee the signing process. This would require a “threshold number of partial signatures to be combined into a final signature”, without the full key ever existing in a single instance. However, such an approach would involve “considerable financial cost” as the CNB would have to acquire a number of specialised hardware devices.
Instead, the study finds that “co-custody” would be a “highly secure solution”. This would involve entrusting an external custodian to hold the bitcoin, but then using multi-party orchestrator technology to co-sign any transfer of the assets.
The report says the CNB has held meetings with the European Central Bank and the International Monetary Fund to discuss how its bitcoin holdings could be reported from a legal and statistical perspective. All the institutions agreed that, under IMF guidelines, directly held bitcoin could not be classed as an official reserve asset nor as a foreign currency asset.
Instead of forming part of the CNB’s international reserves, the report says directly held bitcoin would be listed as a balance sheet item called “tangible and intangible assets”. If the value of the holdings grew to multiple billions of koruna, the bank would create a “separate sub-item” for bitcoin on its balance sheet.
Bitcoin would be valued at its acquisition price or its current fair value, whichever was the lower, the report says. This means it would be recorded in the account at its acquisition price, and an allowance would be created if the fair value decreased. The report adds that the bank would only record profits and losses on these assets when it realised them.
The CNB’s small-volume bitcoin purchases would appear in its costs, while larger volume purchases would “not appear at all” on the bank’s list of assets. This was because, from an accounting point of view, including such purchases in this section of its records would be “similar to selling one type of asset from the reserves and buying another”.
The bank acknowledges the risks involved with bitcoin. These include the high energy consumption associated with its network; what might happen if Strategy, a bitcoin ‘treasury firm’ that holds 2.9% of the assets in existence, were to fail; the asset’s high volatility; and the various illicit activities bitcoin has been used for.
The report says it is “appropriate now to start testing the technology and assessing it in detail”, and that doing so will “help the CNB to better understand the potential limitations and risks of technologies related to bitcoin and the blockchain”.
The bank also calls for attention to be paid to stablecoins and deposit tokens, which could “eliminate the volatility of cryptocurrencies”.
Reaction across Europe
Central Banking reached out to central banks in Europe to get their perspectives.
The European Central Bank and the central banks of Croatia, France, the Netherlands, Serbia, Spain, Switzerland and the UK did not wish to comment on the CNB’s decision.
The Swiss National Bank (SNB) tells Central Banking that cryptocurrencies, including bitcoin, do not “meet the SNB’s currency reserve requirements”.
The Bank of Estonia says it has “not considered taking a similar step” to the CNB.
The Netherlands Bank (DNB) says it has “a process in place for deciding on its strategic asset allocation”. Any new asset class included in this “would be the result of a thorough process with many checks and balances in place”.
“So far digital assets have not made it into DNB’s SAA,” a spokesperson says.
The National Bank of Ukraine (NBU) says the CNB’s initiative is an “interesting experiment”. However, the NBU does “not plan to include virtual assets in its international reserves”, as doing so would “reduce the level of usable reserves, worsen external stability indicators, and undermine confidence in the central bank”.
As the central bank of a country at war, the NBU says its reserves are a “critical instrument” for safeguarding macro-financial stability. Adding bitcoin to the reserves would “introduce additional vulnerabilities” and go against the bank’s reserve management framework, which is “guided first and foremost by the principle of asset safety”.
“Sharp and unpredictable fluctuations in the prices of virtual assets would translate into excessive volatility in the value of FX reserves,” the NBU notes, adding that in the country’s circumstances, this would “at a minimum complicate the use of reserves to maintain confidence in the domestic currency, anchor exchange rate expectations, and ensure price stability and macro-financial resilience”.
Aside from Russia’s full-scale invasion, Ukraine’s domestic legislation is another factor stopping the bank from holding such assets, as they are not included in the “strict” law that defines the composition of the NBU’s reserves.
“Even if such a legal possibility existed, virtual assets would not qualify as reserve assets under established international standards,” the bank says. The NBU’s technical memorandum of understanding with the International Monetary Fund lists the components of Ukraine’s international reserves, and this list does not include virtual assets.
The National Bank of Serbia says the law governing its activities does “not envisage investing foreign exchange reserves in digital currencies” and it is not currently looking to include them in its reserves.
However, it remains “vigilant about global developments in digital assets and potential future implications for financial stability”. It adds that it “will actively monitor the effects of these measures on financial markets, and will continue to manage the foreign exchange reserves in accordance with the principles of safety, liquidity and profitability”.
“The inclusion of digital assets in foreign exchange reserves is a complex matter that requires a high degree of legal clarity, well-defined regulatory frameworks, stable market conditions and appropriate risk-management infrastructure,” the bank says. Doing so “includes careful consideration of market volatility, cyber security risks and valuation challenges specific to digital assets”.
“In international practice, such investments remain limited, and the National Bank of Serbia will continue to carefully follow global developments and standards in order to make decisions that best support the country’s financial stability.”