The governor of the Czech National Bank (CNB), Aleš Michl, has called on central banks to study Bitcoin rather than condemn it, noting that they could greatly benefit from this. Michl made the comments on X, noting that Bitcoin is different from all other digital assets.
According to Michl, Bitcoin is unlike every other digital asset and should not be grouped with them. Instead, the central banks need to assess Bitcoin and its underlying technology.
He said:
“Bitcoin, however, is a different story. It should not be lumped together with other crypto assets. We central bankers should study it and explore the technology it is built on. Studying Bitcoin won’t harm us – on the contrary, it will strengthen us.”
Michl’s comments on Bitcoin and its potential strengths are likely a reaction to the criticisms of several of Europe’s top bankers against Bitcoin. While Michl has proposed that CNB add Bitcoin to its portfolio, other central bank governors have warned about BTC’s risks.
European Central Bank president Christine Lagarde said earlier that Bitcoin cannot qualify as a reserve asset because it is not liquid, stable, or secure. The governor of Germany’s central bank, Deutsche Bundesbank, Joachim Nagel, also criticized Bitcoin for the same reasons and even compared it to digital Tulips, a reference to the Tulip boom and crash of the 17th century.
Despite the criticisms, the CNB Board has already approved the proposal to study Bitcoin and determine whether it would fit the country’s portfolio well. The result will determine whether the bank will allocate funds to Bitcoin as part of a broader effort to diversify reserves.
The CNB has already started allocating around 5% of its portfolio to Gold. It also wants to invest up to 30% in equities, showing that it is not shying away from more volatile assets.
CNB governor differentiates Bitcoin and other crypto
Meanwhile, the Czech top banker has also warned about the risks of cryptocurrencies to clarify his stance on digital assets. He noted that the CNB is currently in the analysis and discussion stage, and the outcome of the analysis will determine the next step.
According to Michl, the high risk of crypto assets is due to their relative infancy and volatility. He noted that crypto markets will likely experience multiple successes and failures before they achieve success, similar to what investment management firms went through in the country when they transitioned from socialism to capitalism in the 1990s.
Michl said:
“I remember the 1990s in our country when the transition from socialism to capitalism saw the birth and simultaneous collapse of many investment funds. The crypto asset market will experience similar failures and successes.”
Given the risks associated, Michl has called for investors to only invest money in what they understand while adding that they should be ready for the potential losses associated with such investments.
Even as he distinguished Bitcoin from other cryptocurrencies, he admitted that the flagship asset is highly volatile and remains high-risk. Thus, professional investors should know its risks before committing their funds.
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Source: https://www.cryptopolitan.com/czech-bank-governor-bitcoins-potential/