Strategy Challenges MSCI's Policy Change for Index Inclusion

Summary:
The largest Bitcoin treasury company, Strategy, has voiced its concerns regarding MSCI's proposal to modify index inclusion criteria that would negatively impact digital asset treasury firms. This article discusses Strategy's arguments against the policy change and highlights the potential implications for the cryptocurrency market.

Key Takeaways

Strategy has formally responded to MSCI regarding policy changes that may exclude crypto-heavy firms from index inclusion.
The proposed changes could place bias against cryptocurrencies while treating other asset classes more favorably.
Concerns have been raised about systemic risks associated with crypto treasury companies, particularly regarding volatility and accounting practices.
The new eligibility criteria may lead crypto treasury companies to reduce or sell their holdings.

Strategy responds to MSCI letter, makes case for index inclusion

Strategy's Response to MSCI's Letter

On Wednesday, Strategy, which is recognized as the largest company holding Bitcoin reserves, submitted feedback to MSCI. The feedback was in response to a proposed policy change that would prevent digital asset treasury companies with 50% or more of their total assets in cryptocurrency from being included in stock market indexes.

According to Strategy, digital asset treasury companies are more than just holders of cryptocurrency; they actively adjust their business operations. The letter mentioned that Strategy's Bitcoin-backed credit instruments illustrate this point effectively.

The feedback emphasized that the new policy proposal might introduce bias against cryptocurrencies as an asset class, rather than allowing MSCI to function as a neutral evaluator.

First page of Strategy’s letter to MSCI

Strategy's letter pointed out that MSCI does not exclude other business types that heavily invest in a single asset class, such as real estate investment trusts (REITs), oil firms, and media companies. The letter also noted that adopting this policy could undermine efforts made under President Donald Trump to position the United States as a leader in the cryptocurrency realm. Critics, however, have raised concerns that including crypto treasury firms in global indices could introduce various risks.

Understanding the Risks Linked to Crypto Treasury Companies

MSCI has observed that crypto treasury companies possess qualities similar to investment funds, rather than conventional operating firms that generate goods or services. The firm highlighted the absence of standard valuation methods for companies capitalized in cryptocurrencies, which complicates proper accounting and could distort the values reflected in index calculations.

As of now, Strategy holds 660,624 BTC on its balance sheet. However, its stock has experienced a decline of over 50% in value over the past year, as per Yahoo Finance. Bitcoin has also seen a drop of 15% from the start of 2025 when it was trading above $109,000, indicating a trend where Bitcoin has outperformed its equity representation.

The significant volatility characteristic of cryptocurrencies may amplify the fluctuations of indexes that track these companies or create correlation risks, where the index performance mirrors that of the crypto market, as indicated in a report from the Federal Reserve.

Bitcoin and Ether volatility compared to stock indexes, oil, and gold

One key observation made by the Federal Reserve is the widespread use of leverage among crypto traders, which further exacerbates volatility, amplifying the fragility of cryptocurrencies as an asset class.

Moreover, the proposed policy change from MSCI, expected to be implemented in January, may lead treasury companies to divest their cryptocurrency holdings in order to comply with the new eligibility standards for index inclusion, potentially placing additional pressure on digital asset markets.

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