Czech Central Bank: Banks have no reason to fear Bitcoin replacing the existing monetary system

The Czech National Bank (Czech Central Bank) has published a statement on Bitcoin and other cryptocurrencies on its official website. The document discusses the popularity of Bitcoin in Prague, the capital of the Czech Republic, and other parts of the country, as well as whether cryptocurrencies pose a threat to the traditional banking system, and argues that fiat currencies perform better than Bitcoin in terms of price volatility.

Czech National Bank: Banks have ‘no reason to fear’ Bitcoin

The Czech National Bank’s statement on cryptocurrencies, titled “Don’t be afraid of Bitcoin,” seeks to address popular narratives about Bitcoin and cryptocurrencies as a potential threat to the existing monetary system.

The document begins by noting that “Prague is home to a strong community of cryptocurrency supporters and users.” The statement then turns its focus to “questions about whether institutions like the Czech National Bank should be afraid of Bitcoin, and whether Bitcoin and other cryptocurrencies will crowd out traditional currencies.”

The Czech National Bank stated that "banks have no reason to fear Bitcoin and other cryptocurrencies". The adoption of virtual currencies was described as "negligible in size and scope", and it was considered that "the total amount of electronic transactions in Bitcoin worldwide accounts for only 16% of electronic transactions in the Czech koruna (a currency with only 10.5 million users).

Bitcoin described as antithesis to Czech monetary system

The document argues that Bitcoin does not qualify as a proper mainstream monetary commodity because its price fluctuates constantly. A good currency is considered to have a stable purchasing power. The Czech National Bank argues that due to Bitcoin’s fixed supply, its volatility is “inherent”.

Bitcoin is described as “the antithesis of the Czech flexible monetary system, which is based on the principle that in order to keep the purchasing power of money relatively constant, the amount of money must be flexible over time.” Price volatility is considered “the most advantageous feature of the current form of money,” and the bank says there is “no reason to fear that our existing monetary system will be replaced by an alternative with a fixed supply.