MSCI is reviewing whether companies primarily holding Bitcoin should be classified as funds, potentially leading to their removal from indexes.
MicroStrategy (Strategy) shares fell after the initial proposal, highlighting the market’s sensitivity to index inclusion.
Strive Asset Management sent a letter to MSCI, arguing that the move would abandon the neutrality of passive investing.
The decision could impact billions of dollars in investments tied to MSCI-linked funds.
Volatility and accounting differences (GAAP vs. IFRS) add complexity to the classification.
MSCI’s proposal to reclassify digital asset treasury firms (DATs) raises fundamental questions about how these companies should be viewed. The core issue is whether a company whose main function is acquiring and holding Bitcoin, using financial engineering to support it, should be considered an operating business or a fund.
Background:
MSCI’s potential decision stems from its policy of not including investment funds in its equity benchmarks. If a company’s digital asset holdings exceed 50% of its total assets, it risks being removed from MSCI indexes. This could force funds tracking these indexes to sell their shares, creating significant outflows.
Impact on MicroStrategy:
MicroStrategy (Strategy), led by Michael Saylor, is a prime example. The company has embraced Bitcoin, amassing a substantial digital asset treasury. A reclassification could trigger outflows of up to $8.8 billion from funds holding MSTR stock, according to JPMorgan estimates. The stock is already highly volatile, and exclusion from major indexes could exacerbate price swings.
Strive Asset Management’s Response:
Strive, cofounded by Vivek Ramaswamy, argues that MSCI’s proposal is flawed. Their letter emphasizes that index providers should remain neutral, reflecting the equity universe without imposing subjective judgments on business strategies. Strive suggests that MSCI already offers tools for investors who wish to exclude Bitcoin-heavy firms, such as custom indexes.
Accounting and Regulatory Challenges:
The debate also highlights accounting and regulatory challenges. U.S. companies using GAAP must mark digital assets to fair value, while companies under IFRS can often keep crypto at cost. This discrepancy could lead to inconsistent classifications based on jurisdiction. Furthermore, companies might shift exposure from spot Bitcoin to derivatives to circumvent the 50% threshold, complicating enforcement.
Potential Outcomes:
Positive Scenario:: A reversal by MSCI would signal confidence in the evolving digital asset market, potentially boosting Bitcoin and related stocks.
Negative Scenario:: Exclusion from MSCI indexes could dampen demand for publicly traded crypto creations, negatively impacting companies like MicroStrategy and the Wall Street banks that finance them.
Q: What is MSCI’s proposal?
MSCI is considering reclassifying companies holding large amounts of Bitcoin as funds, potentially removing them from key indexes.
Q: Why is MSCI considering this change?
MSCI does not typically include investment funds in its equity benchmarks and believes that Bitcoin treasury firms may resemble such funds.
Q: What could be the impact on MicroStrategy?
MicroStrategy’s stock could face significant outflows from funds tracking MSCI indexes if it is excluded.
Monitor MSCI’s decision on January 15, 2026, as it will significantly impact Bitcoin treasury firms.
Understand the potential for increased volatility in stocks like MicroStrategy due to index-related reclassifications.
Recognize the accounting and regulatory complexities surrounding digital asset classifications.
Do you think MSCI should exclude Bitcoin treasury companies from its indexes? Share your thoughts in the comments below!
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