CW6: Czech National Bank Considers Investing $7B in Bitcoin, US Banks Allowed to Hold Bitcoin and Tether's spectacular success

First Things First: The Berglinde Briefing is also available in German. You can find it here!

Good Morning Everyone,

This week, we take a look at the news making headlines, including the Czech National Bank (CNB) proposing a Bitcoin acquisition plan of up to 5% of its reserves. What are the key driving forces behind the proposal and what will it mean for other European central banks?

We will also talk about the recent reversal of SAB 121, and the unique opportunity it provides for US banks. How will it change the game and address the strained relationship between the crypto sector and the banking industry??

What are we talking about today?

News Flash: Czech National Bank to Invest $7B Bitcoin in Reserve and SAB 121’s Reversal Allows Banks Serve Crypto Clients?

Graph of The Week: Tether playing in a league of its own

Institutional Flows: Bitcoin ETF AUM Crosses $40 Billion for the First Time

Meme of the Week: Let The Cobbler Stick To His?Last

Flash 1: Czech National Bank to Invest $7B Bitcoin in Reserve

The Czech National Bank (CNB) is set to become the first European central bank to invest in Bitcoin Reserve as part of its diversification strategy. CNB Governor Ale? Michl is expected to propose a Bitcoin acquisition plan of up to 5% of its reserves. With this plan, the bank will potentially acquire $7.3 billion in BTC as part of its diversification strategy.?

What are the Key Drivers of CNB’s Bitcoin Acquisition Strategy?

• CNB is looking at Bitcoin as a potential reserve asset and acquiring “a few Bitcoins” is part of the national bank’s diversification.
• Bitcoin has zero correlation to bonds, which makes it an interesting asset to include in a large portfolio.
• CNB has brought inflation down from 17.5% in 2002 to 3% in 2024 by gradually increasing gold holdings from 0% to around 5% and planning for 30% in equities. Bitcoin presents a unique opportunity for further diversification.?
• US President Donald Trump has boosted optimism among crypto investors with more regulatory clarity expected for the cryptocurrency industry, which will bolster Bitcoin’s momentum.

Although Bitcoin is an interesting asset worth considering for diversification, the CNB board will need to provide thoughtful analysis before making its final decision. If the CNB board upholds the proposal, it could be a defining moment as other central banks in Europe will likely follow suit.?

Berglinde's Take: Bitcoin was created as a financial system for the people, but national banks embracing it was always inevitable. The first movers will gain a massive advantage, and the Czech National Bank’s potential adoption signals a major shift in institutional recognition of Bitcoin’s role as a reserve asset. That said, as Governor Michl himself acknowledged, this is still under thorough review and far from a done deal. While we’re not surprised by this development, it will be interesting to see how other central banks react and whether this marks the beginning of a broader trend in Europe.

Flash 2: SAB 121’s Reversal Allows Banks to Custody Bitcoin

Jerome Powell stated that banks can serve crypto customers if they effectively manage the associated risks. However, Bitcoin advocate and investor Preston Pysh explains that regulatory shifts like the SAB 121’s (Staff Accounting Bulletin 121) recent rescission could permanently entrench Bitcoin into the financial system, surpassing the importance of a Strategic Bitcoin Reserve.

Why the relationship between the Bitcoin sector and U.S. banks has been strained

• While the central bank is not opposed to innovation within the industry, the threshold for banks engaging in crypto activities has been high because they are new.
• After the fall of the crypto exchange FTX in late 2022, federal agencies, including the Federal Reserve, highlighted the potential dangers of crypto-assets.
• Nic Carter, co-founder of Castle Island Ventures introduced the term "Operation Choke Point 2.0" in 2023, suggesting a government-led crackdown on the crypto industry, which further exacerbated the tension between banks and the crypto sector.
• Banks tend to serve a select number of crypto firms, but they still face the risk of incurring hefty fines if regulatory issues arise

With crypto firms voicing concerns over the challenges they face with bank accounts, the issue of crypto debanking has garnered attention among legislatures. Powell acknowledged the need for a more robust regulatory framework for cryptocurrencies. However, no bills have been enacted into law yet despite various legislative efforts to regulate the crypto market.?

The recession of SAB 121 is a turning point that could have more impact than the concept of a Strategic Bitcoin Reserve. Initially, SAB 121 required banks to classify Bitcoin custody as a liability on their balance sheets. This meant that every dollar worth of Bitcoin held had to be offset with an equivalent amount of capital (treasuries or other assets). As a result, institutional Bitcoin custody became economically prohibited and banks opted out of offering Bitcoin-related services entirely.?

How does the rescission of SAB 121 change the game?

• Bitcoin custody is now treated as an asset rather than a liability, dramatically lowering barriers for major banks to enter the Bitcoin ecosystem.
• Banks can now custody Bitcoin without facing onerous balance sheet requirements, creating an opportunity for loan products, derivatives, and other financial instruments tied to Bitcoin.
• Major banks are willing to custody of Bitcoin, cementing its role as a global settlement layer in the financial system.

SAB 121’s reversal represents a monumental shift in Bitcoin’s journey toward mainstream adoption. Removing institutional custody barriers paves the way for Bitcoin’s integration into the global financial system in a more enduring manner than government-led initiatives like a Strategic Bitcoin Reserve.

Berglinde's Take: This is a game-changer. The reversal of SAB 121 removes one of the biggest institutional roadblocks to Bitcoin adoption, allowing banks to custody Bitcoin without the crippling balance sheet penalties. This will unleash a wave of new financial products—loans, derivatives, and structured products—built around Bitcoin, bringing it further into the mainstream financial system.

At Berglinde, we’re excited about what this means for our industry. As a provider of exactly these types of Bitcoin-backed financial services, we see this as a massive opportunity for institutional capital to flow into Bitcoin and its broader ecosystem.

Notably, this also marks the third and final factor Michael Saylor outlined for Bitcoin’s price to reach multiple millions of dollars: (1) A Bitcoin ETF, (2) Accounting clarity, and now (3) banks can custody Bitcoin. With this shift, Bitcoin is no longer just an outsider asset—it’s becoming an integral part of the global financial system.

Tether's Profitability is Off The Charts

Tether’s 2024 financials reveal an astonishing $13 billion in net profit, making it likely the most profitable company in the world on a per-employee basis. With just a handful of employees, Tether generates an eye-watering $85.6 million in profit per employee—dwarfing even the most successful tech and finance giants.

For comparison, Goldman Sachs reports $288K, Meta $456K, Apple $571K, and NVIDIA—a company often praised for its profitability—$1M per employee. Yet, when plotted on a graph, these numbers look almost trivial next to Tether’s staggering efficiency.

This highlights the immense cash flow generated by Tether’s USDT operations, largely driven by interest earned on the reserves backing its stablecoin. It also underscores the sheer profitability of running a dominant financial infrastructure with minimal overhead.

Berglinde's Take: Tether is a phenomenal company, and knowing that they are among the biggest Bitcoin advocates out there is fantastic. Their strong presence in Lugano, a Swiss city embracing Bitcoin, is exciting—but it also stings to think that Tether could have been a Swiss company if our regulators were closer to the market. A missed opportunity for Switzerland.

Bitcoin ETF AUM Crosses $40 Billion for the First Time

Bitcoin ETFs have reached a new milestone, surpassing $40 billion in assets under management. While we saw small inflows over the past week, overall AUM remained relatively stable. This steady growth underscores Bitcoin’s increasing role as an institutional asset class, with demand holding strong despite market fluctuation.

Let The Cobbler Stick To His?Last