Strategy Urges MSCI To Reconsider Excluding Firms With Digital Asset Reserves

TLDR

• Strategy argues that digital asset firms are operating businesses, not investment funds.
• The company challenges MSCI’s 50% threshold as arbitrary and harmful to innovation.
• Strategy warns exclusion could hurt U.S. competitiveness and passive capital flows.
• Strategy pushes for MSCI to extend consultation on the proposed changes.

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MSCI, a global index provider, recently proposed a plan to exclude companies whose digital asset holdings represent more than 50% of their total assets from its Global Investable Market Indexes. The proposal has sparked strong opposition from firms that hold substantial digital asset reserves, notably Strategy. The company, led by Executive Chairman Michael Saylor, argues that its operations are distinct from investment funds and should not be subject to the new rule.

Strategy’s Response to MSCI’s Proposal

In a formal letter, Strategy expressed its concerns regarding MSCI’s proposal. The company stressed that its business model revolves around using digital assets as operational capital, not merely as a passive investment. “We are an operating business, not a fund,” Strategy asserted in the letter, emphasizing that its use of Bitcoin supports product development and other core activities rather than merely tracking price movements.

Strategy argues that its digital asset treasury operations are similar to the way banks or insurance companies use reserves. The company further pointed out that it has maintained a long-term commitment to Bitcoin as part of its business strategy and that digital assets play an active role in its corporate treasury program.

The Arbitrary Nature of the 50% Threshold

One of the main points Strategy raised in its letter is that the 50% threshold proposed by MSCI is arbitrary. The company noted that other industries and sectors, such as oil, real estate, and utilities, often hold large concentrated reserves in specific assets without facing the same scrutiny. Strategy believes that singling out digital asset-heavy firms unfairly targets a growing sector and risks stifling innovation.

By introducing a rigid threshold, MSCI may unintentionally harm businesses that are exploring new technologies and financial systems. Strategy warned that this exclusion could lead to a loss of billions in passive capital flows and undermine the competitive advantage of U.S.-based companies that are involved in the digital asset space.

Concerns Over Policy Influence in Index Construction

Strategy also raised concerns about the potential policy bias that could be injected into MSCI’s index construction process. The company noted that federal policy in the U.S. has been moving toward supporting digital asset innovation. Therefore, MSCI’s proposed exclusion could conflict with the broader regulatory environment and hinder technological progress.

The letter further stated that such a move could damage the reputation of U.S. companies that are leading innovation in the digital asset field. Strategy argued that by excluding companies with significant digital asset holdings, MSCI could disrupt the growth of new financial technologies, ultimately slowing their expansion.

Request for Extended Consultation

In light of these concerns, Strategy has requested that MSCI extend its consultation period. The company has asked for a more detailed explanation of the proposed changes and a more thorough analysis of how the new standards would affect businesses like theirs. Strategy believes that a more thoughtful and inclusive approach would benefit the industry as a whole.

In conclusion, Strategy’s response to MSCI’s digital asset exclusion proposal represents a broader debate about how companies that hold large amounts of digital assets should be treated by financial indices. Strategy insists that digital asset treasury businesses should not be categorized as investment funds, and that the new proposal could have far-reaching consequences for innovation and competitiveness in the U.S.

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