Pastor: About a year ago, you announced your intention to invest up to 5 percent of your reserves in Bitcoin. What role might Bitcoin play in a central bank’s portfolio?

Michl: There are very few assets with near-zero correlation to equities or bonds. In a large portfolio, you need some of them to improve diversification. Bitcoin’s potential advantage is that its correlation with bonds has been low. The challenge is that its history is still short. We have known gold prices for a little over 100 years. Bitcoin has a market price history of only about 16 years. Its future value could be very high, or it could go to zero. Both are possible. This kind of valuation uncertainty is typical for new technologies, where investors learn over time about long-term productivity and payoffs.

In a paper we published in February, CNB researchers Tomáš Adam and Michal Škoda and I ran a simple “what if” exercise. We asked what would have happened to the CNB’s reserve portfolio had we added a small share of Bitcoin. Using data from 2010–25, we find that Bitcoin looked like a strong diversification asset. The model predicted that a 1 percent Bitcoin allocation would have raised average returns much more than a similar increase in equities or gold, while increasing overall portfolio risk by less (per unit of return).

Pastor: Have you purchased Bitcoin since that announcement?

Michl: Yes. But we have started slowly and created a test portfolio of digital assets, including Bitcoin, outside of our foreign-exchange reserves.

We launched the portfolio in November 2025. The initial investment was $1 million, and we will not increase it from there. The portfolio will include Bitcoin, US dollar stablecoins, and US dollar tokenized deposits.

A full evaluation is expected in two to three years. We will judge success mainly in terms of learning and our ability to operate, not in terms of short-term profits.

We will test different ways to buy and sell. We will test custody, crisis handling, anti-money-laundering compliance, and accounting. And we will build expertise—learn, understand, and prepare for the future.

Pastor: Have you considered launching your own central bank digital currency—a digital crown?

Michl: No. If the goal is fast and cheap payments, instant payments are a better solution. I’m a liberal in the tradition of Milton Friedman—I prefer market-based solutions. The state, and the central bank, should provide the infrastructure.

In the Czech Republic, the central bank provides the instant-payments infrastructure. Over the past four years, we have improved it so that everyone can use instant payments.

Pastor: Do you use AI at the CNB? How?

Michl: Yes. In one year, we have made strong progress. We use AI to improve inflation nowcasting—Adam, our colleague Josef Švéda, and I even wrote a post about it on the cnBlog last year. In supervision, we use AI as a first check to see whether all required documents are included.

Pastor: Do you plan to increase your use of AI in the future?

Michl: Yes, significantly. In February, we added four new NVIDIA H200 GPUs to start testing our own AI models in-house. It’s a starting point, not a giant training cluster. We will invest further in AI and cybersecurity.

Pastor: Bulgaria joined the eurozone in January, making the Czech Republic one of only six EU countries with its own currency. There are some political forces in your country pushing to adopt the euro. How do you see the pros and cons of the euro versus your own currency?

Michl: Our strong koruna policy helped us a lot in the fight against inflation. That’s why I support keeping the koruna in the Czech Republic.

Pastor: What are the main challenges for Europe today?

Michl: Governance. Europe needs fewer bureaucrats, less red tape, and more delivery, so better governance is essential. At the CNB, we cut staff by 5 percent early on, and it increased clarity, ownership, and performance.

Aleš Michl has been the governor of the Czech National Bank since 2022. Lubos Pastor is the Charles P. McQuaid Distinguished Service Professor of Finance and a Robert King Steel Faculty Fellow at Chicago Booth. They spoke in February as part of Booth’s Distinguished Speaker Series. This Q&A draws on their remarks and expands on it through further reporting.