MSCI’s Bitcoin Exclusion Mirrors Penalizing Chevron for Oil, Says Strategy CEO

The MSCI index's proposed exclusion of companies holding more than 50% of their assets in cryptocurrencies, like Bitcoin, is being compared to penalizing major oil companies such as Chevron for their oil holdings. This comparison was made by Strategy CEO Phong Le, who argued that this stance is misguided and could harm innovation in the crypto sector.

Key Takeaways

MSCI’s proposed rule could unfairly target companies with significant cryptocurrency holdings.
Phong Le argues that current asset-heavy companies in traditional sectors don’t face similar exclusion.
The MSCI proposal mischaracterizes digital asset companies, suggesting they are more like investment funds.
Strategy sent a letter to MSCI stating that such exclusions bias the index against cryptocurrencies.
The consultation period for the MSCI proposal ends on December 31, 2023, with results expected on January 15, 2024.

MSCI’s Bitcoin snub is like penalizing Chevron for oil: Strategy CEO

MSCI's Proposed Exclusion of Cryptocurrency Holdings

The stock market index MSCI has announced plans to consult on whether to exclude companies with more than 50% of their assets in cryptocurrencies from its indexes. Strategy CEO Phong Le argues that this approach is akin to penalizing leading energy corporations like Chevron for their substantial oil holdings.

In an interview with the Schwab Network on Wednesday, Le expressed his respect for stock indexes but criticized MSCI's position as “misinformed and misguided.” He pointed out that just as Chevron has a majority of its assets in oil, other companies like Weyerhaeuser, which has significant wood holdings, and Simon Property Group, with considerable real estate assets, are not being considered for exclusion.

Le remarked that restricting passive index investment in Bitcoin today could stifle innovation in a sector that is still in its early stages. “It seems very early to pick winners and choosers and stifle innovation in a category like this,” he stated.

Mischaracterization of Digital Asset Companies

Le further elaborated that MSCI’s proposal mistakenly labels companies like Strategy as investment funds, rather than as operating companies. While the MSCI cited that digital asset treasury companies (DATs) might resemble investment funds, which are not eligible for index inclusion, Le clarified that Strategy has been operating as a legitimate company since its public listing in 1998.

Strategy's Concerns about MSCI's Proposal

Le’s comments coincided with Strategy’s release of a letter to MSCI, addressing concerns that the proposal would demonstrate a bias against cryptocurrencies as an asset class. This indicates that MSCI is not acting neutrally in this matter.

The consultation on this proposal remains open until December 31, 2023, with the outcomes to be announced on January 15, 2024. Any resulting changes to the index will take effect in February.

Charlie Sherry, the finance chief at Australian crypto exchange BTC Markets, noted that MSCI typically only consults on changes when there is a lean towards implementation.

(Related: Strategy’s Bitcoin treasury swells past 660,000 BTC after fresh $962M buy)

(Magazine: Bitcoin whale Metaplanet ‘underwater’ but eyeing more BTC: Asia Express)