Governor of the Czech National Bank Ales Michl recently suggested that the CNB might consider including Bitcoin in its reserves. Is this a good idea? Should the CNB invest in this digital asset?

Five Students For Liberty volunteers from Czechia weighed in.

Filip Blaha

The CNB’s main and most important function is to ensure price and financial stability, as mandated by law. Unfortunately, it has failed to fulfill this mandate in recent years. Let us be clear, however, that the establishment of Bitcoin reserves would not contribute in any way to the fulfillment of this mandate. Nor will it help those proponents who believe that this move will increase the legitimacy of Bitcoin as money.

Central banks hold foreign exchange funds because of the need to intervene in foreign exchange markets. Their goal is to maintain stable exchange rates, usually against major world currencies such as the dollar and the Euro.

These interventions aim to support the domestic economy, reduce exchange rate risks, maintain a stable trade balance over the long term, fight inflation, and achieve other macroeconomic goals. However, Bitcoin currently plays no role in these activities, and its ability to influence such processes is minimal, if not altogether absent.

Therefore, there is no meaningful reason why a central bank should purchase Bitcoin to fulfill its mandate. And if the move would not serve to fulfill the mandate, the CNB should not implement it at all.

Bitcoin advocates, however, often argue otherwise. They point out that the mere consideration of the CNB purchasing Bitcoin would encourage its promotion and adoption by the public. What if the CNB actually bought Bitcoin and started working with it? Such a move would mainly cause people to hold Bitcoin more in anticipation of its price rising. Such a move would, in no way, support Bitcoin as a unit of account or as a medium of exchange. 

Moreover, it would set a dangerous precedent. If central banks, such as the Fed, held large enough reserves in Bitcoin, they could influence its price and independence by their interventions. This would contradict the idea of Bitcoin as a decentralized and uncensorable money.

In sum, the requirement for the CNB (or even the Fed) to buy Bitcoin makes no sense either from the perspective of a Bitcoiner or from the position of a central banker.

Teo Kuběna

The Czech National Bank, as a conservative institution with a significantly above-average performance compared to the world, would send a clear signal of legitimacy and support for Bitcoin’s acceptance in society by adopting it. The move would lead to an increase in demand — firstly from the CNB’s reserve creation and other institutions that could take inspiration, and secondly from the wider public, who would gain confidence in Bitcoin. This would ultimately contribute to an increase in its price.

This situation would primarily benefit those who have trusted Bitcoin since its inception and contributed to its success and survival. On the other hand, it is true that those who do not purchase Bitcoin before these steps by state institutions will not be able to benefit from its future appreciation to the same extent.

But it is important to remember that the purpose of Bitcoin was never to get rich quick, but to create real money that is resistant to corruption, censorship, and devaluation. These qualities remain available to everyone, regardless of whether they own Bitcoin.

However, if state institutions attempted to gain control of the Bitcoin network by operating nodes or mining stations, it would be appropriate to reject this initiative. Reserve creation, however, is not such a case.

From a libertarian perspective, I cannot actively support or call for this move because the CNB has funds that I consider illegitimately acquired. However, if the CNB decides to create reserves in the form of Bitcoin, I will view this move rather positively.

Filip Švec

Bitcoin reserves at the CNB are fundamentally opposed to my position as a libertarian. I think that the state should be as small and weak as possible. That is why I am comfortable with the state not having legitimate and powerful payments like Bitcoin. Appealing-sounding state interventions are often double-edged, and the means to implement them tend to be illegitimate to begin with. The money used to buy Bitcoin would either be newly issued into circulation, devaluing the savings of all CZK holders, or raised in taxes that are collected under the threat of violence.

I see another problem with the CNB’s acceptance of Bitcoin. I don’t like the idea that state acceptance of something automatically increases its legitimacy in the eyes of the public. The argument that state acceptance of BTC legitimizes Bitcoin runs the risk that this criteria could become the new benchmark for the cryptocurrency world. This would give the state another tool to influence what is perceived as good or bad.

From a libertarian perspective, I consider arguments about legitimacy based on state acceptance to be flawed logic. The point of libertarianism is that the state should not determine what is legitimate. We should spread this idea to the wider public and encourage people not to rely on the state to make decisions or form their worldview.

Instead, we should work toward greater independence of individuals from the state apparatus and promote decentralized tools that allow freedom without state approval or intervention.

Jonáš Kurus

Should the adoption of Bitcoin as a reserve currency actually occur, this decision should be carefully considered and supported by a thorough analysis. However, if the move does not lead to the collapse of the system or the fundamental decline of civilization, I would see it as a step forward. 

The main reason for my conviction is the symbolism and the signal it would send. It would legitimize Bitcoin as a currency that can compete with government money, even in a significant role such as functioning as reserves. It would signal that Bitcoin is to be taken seriously — something that may not have been obvious to some until now.

It is important to remember, however, that for Bitcoin to be universally adopted, it is necessary to utilize its potential not only as a store of value but also as a medium of exchange. It cannot be overlooked that in the long term, the CNB would face challenges associated with the adoption of Bitcoin, which could represent significant competition to the Czech crown. This raises the question of whether CNB bankers have a long-term strategy to prevent Bitcoin’s position from threatening the crown, or whether they are underestimating this possibility, which could unintentionally strengthen the likelihood of this happening.

My personal opinion is that Bitcoin is still underestimated by the CNB. That is why I support the introduction of reserves in the form of Bitcoin.

Ondřej Pšenička

The idea of adopting Bitcoin into central bank reserves sounds attractive at first glance: increased price, legitimization of the network, more difficult ban, great advertising, and support for adoption. After all, Bitcoin is neutral, for everyone, and as we say, the honey badger doesn’t care, right?

Still, I don’t think anyone who truly understands the nature of Bitcoin should celebrate its purchase by the central bank. Regardless of whether one is an “OG Bitcoiner” who seeks to separate money from the state or an investor who sees Bitcoin as an opportunity to leverage fiat savings, the long-term goal remains the same. Bitcoin’s price today is driven not only by speculation but also by the fact that the network is gradually fulfilling its ideal of digital, stateless, uncensorable, neutral, and hard money. And it is this goal that unites the two groups.

What will really help Bitcoin become global, hard money? Will it be a scenario where banks buy large amounts of Bitcoin, the price skyrockets, and early adopters enjoy riches? Probably not. Bitcoin has a better chance of becoming a global, stateless money if it has as much time to reach as many people as possible before owning even a small amount of Bitcoin becomes unaffordable.

Additionally, there is the question of incentives for developers. Will programmers want to write code for Bitcoin if it becomes a tool of central banks? What if central banks start mining to protect their reserves, even at the expense of losses, and thus completely displace the regular miners? Will the network remain resistant to censorship under these conditions?

If we want Bitcoin to remain loyal to its principles — resistant to manipulation and censorship — it should still be a tool of the people, not a tool of states. The adoption of Bitcoin by central banks may bring short-term benefits, but the long-term consequences could undermine the very foundations on which Bitcoin stands.

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