MNI INTERVIEW: CNB Bitcoin Buy Could Backfire - Ex-Governor
MNI (LONDON) - A Czech National Bank proposal to invest up to EUR7 billion in bitcoin may the boost central bank's near-term profitability, but comes with longer-run risks, former governor Miroslav Singer told MNI.
Speaking ahead of today's non-monetary policy meeting in Prague, Singer said the security offered by CNB’s unusually high level of reserves may tempt policymakers to stray into territory others would not enter.
"Bitcoin can be a part of a diversified portfolio, for obvious reasons. For an average central bank its disadvantage is that its price could be negatively correlated with events in which the central bank may need reserves,” he said.
"However, for the CNB this may not be such a concern since as widely known it has extremely high reserves."
Governor Ales Michl has said he will put a proposal to buy cryptos worth up to 5% of the CNB’s EUR140 billion reserves to the Bank Board today, as first reported by the Financial Times.
Michl later commented that, while Bitcoin is extremely volatile compared with traditional central bank assets such as bonds, the move was nevertheless “worth considering," though currently “only at the state of analysis and discussion” and with no decision imminent.
“It may be a part of the strategy shooting for the reserves' profitability,” said Singer, CNB chief from 2010-2016. “At the same time, I wonder what advances in quantum computing will do for the currently assumed impossibility of its counterfeiting in the longer-run."