Strategy's Objections to MSCI's Proposal
Strategy has formally requested that MSCI abandon a proposed rule that would exclude companies with digital-asset holdings exceeding 50% of their total assets from major global equity benchmarks. In a detailed 12-page letter submitted to the MSCI Equity Index Committee, Strategy argued that the proposed rule is unworkable, susceptible to distortions, and contrary to U.S. policy objectives. The core of the dispute lies in MSCI's plan to evaluate whether digital-asset treasury companies (DATs) should continue to be included in its Global Investable Market Indexes. MSCI's initial assessment suggests that firms holding substantial bitcoin reserves, such as Strategy and BitMine, function more like investment vehicles than operating businesses, a characteristic typically avoided in MSCI's primary equity indexes.
Strategy countered this assessment by stating that the proposed 50% threshold would lead to the exclusion of companies based on the volatility of a single asset rather than their fundamental operational activities. The firm warned that the composition of the indexes could fluctuate erratically in response to changes in bitcoin prices, causing companies to be included or excluded from MSCI benchmarks with each market cycle.
Investor Takeaway
A strict asset-based cutoff could significantly alter how passive funds allocate investments to companies holding bitcoin on their balance sheets. Strategy contends that the proposal would introduce instability into global benchmarks instead of offering clarity.
Inconsistent Application of the 50% Rule
A primary argument from Strategy is that the proposed 50% asset test cannot be applied consistently or fairly. The firm highlighted accounting discrepancies between International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP). Under IFRS, companies are permitted to record bitcoin holdings at their cost on their balance sheets. Conversely, under U.S. GAAP, firms are required to report quarterly fair-value adjustments. This divergence means that two companies with identical digital asset holdings could appear to have vastly different exposure levels based solely on their accounting standards and jurisdiction.
Strategy asserted that this would result in inconsistent index treatment, determined by geographical location rather than the company's business model. Furthermore, the firm noted that companies could inadvertently cross the 50% threshold due to quarterly valuation fluctuations of their digital assets, rather than any actual change in their operational activities. Strategy expressed concern that bitcoin-treasury groups would be subjected to a "whipsaw" effect, being repeatedly included and excluded from MSCI indexes during periods of price volatility. This, the firm warned, would create "chaos and confusion" for both index providers and investors who depend on stable benchmark construction.
Connection to U.S. Policy on Digital Assets
Beyond technical accounting concerns, Strategy framed MSCI's proposal as being in direct opposition to the U.S. government's approach to digital assets. The letter referenced several initiatives from the Trump administration that aimed to increase institutional access to bitcoin, including the concept of a Strategic Bitcoin Reserve and measures to broaden access through 401(k) plans. Strategy also pointed to directives that encouraged a "technology-neutral" treatment of cryptocurrency companies, arguing that MSCI's rule would effectively block bitcoin-reserve companies from accessing approximately $15 trillion in passive investment capital.
The firm's letter stated, "Digital assets represent a technological innovation that can serve as the potential future bedrock of global financial systems." It further argued that excluding companies like Strategy would "stifle innovation" and inaccurately portray the operational realities of bitcoin-treasury companies. Strategy urged MSCI to avoid a hasty decision based on what it described as a "mischaracterization" of its own business and the broader category of DATs.
Investor Takeaway
The ongoing review by MSCI has the potential to directly impact market structure. JPMorgan analysts have estimated that Strategy could experience passive outflows ranging from $2.8 billion to $8.8 billion if it were to be removed from major benchmarks.
Timeline and Next Steps Before MSCI's January Decision
MSCI initiated its review of digital asset holdings in October, which immediately drew significant pushback from the industry. Strategy's detailed letter follows public comments made in November by Chairman Michael Saylor, who asserted that the company is "not a fund" and that index categories do not define its business. Other firms holding bitcoin on their balance sheets have echoed these sentiments.
Strive, another company in the sector, informed MSCI last week that the proposed 50% rule would lead to inequitable outcomes across different jurisdictions. Strive suggested an alternative approach: the creation of optional "ex-digital-asset treasury" versions of indexes for clients who wish to exclude this category. A final decision from MSCI is anticipated by January 15, preceding MSCI's February rebalancing. If the 50% test is implemented, companies holding significant bitcoin reserves would face a more restricted pool of index eligibility.
JPMorgan analysts have projected that Strategy alone could face passive outflows of approximately $2.8 billion, with this figure potentially rising to $8.8 billion if other index providers adopt similar standards. Strategy currently holds 660,624 BTC, valued at nearly $61 billion, making it the largest public holder of bitcoin, according to data from The Block. Consequently, any classification change by MSCI would disproportionately affect passive flows linked to the company.
As feedback continues to be received from market participants, MSCI faces a critical decision that could significantly influence the interaction between digital asset balance sheets and global equity markets. The outcome will determine whether bitcoin-treasury firms remain integrated within mainstream benchmarks or are relegated to a separate category carved out of major indexes.