MSCI’s Plan to Exclude Digital Asset Treasury Firms Faces Strategy’s Opposition

In a detailed response to MSCI’s proposal regarding the classification of Digital Asset Treasury Companies (DATs), Strategy Inc., the world's leading Bitcoin treasury firm, expresses significant concerns.

Key Takeaways

Strategy Inc. opposes MSCI's plan to exclude firms with significant digital asset holdings from key indices.
The company argues that DATs are operational businesses, not investment funds.
Concerns include potential instability in indices and a bias against digital assets.
The proposal contradicts U.S. government efforts to promote innovation and digital asset access.
Strategy urges MSCI to reconsider the proposal and extend the consultation period for further review.

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Strategy's Response to MSCI's Proposal

Strategy Inc., the largest Bitcoin treasury firm globally, has officially responded to MSCI's consultation regarding the classification of Digital Asset Treasury Companies (DATs). MSCI is looking to exclude any firm from its Global Investable Market Indexes if their digital asset holdings exceed 50% of total assets.

In a letter sent on December 10 by Executive Chairman Michael Saylor and CEO Phong Le, Strategy claims that this exclusion is "misguided" and could lead to "profoundly harmful consequences" for capital markets, innovation, and the United States' leadership in the digital asset space.

DATs: Businesses, Not Investment Funds

The main point of Strategy's argument is that DATs, including itself, are operational companies rather than just passive investment vehicles. Strategy emphasizes that it doesn’t merely hold Bitcoin; it actively manages a Bitcoin-backed corporate treasury and capital markets program. This includes issuing various equity and fixed-income instruments that expose investors to different levels of Bitcoin performance.

The company compares its approach to that of traditional financial institutions like banks and insurance firms, which manage risks and returns on specific asset types without being categorized as investment funds.

Concerns About MSCI's Index Stability and Policy Bias

Strategy argues that MSCI's proposed threshold of 50% digital asset holdings is arbitrary and impractical. Due to the inherent volatility of cryptocurrency prices and differing accounting practices, companies could frequently move in and out of MSCI indices. This fluctuation could compromise index stability and erode investor trust.

Additionally, Strategy accuses MSCI of incorporating subjective policy judgments into its index formulation, straying from its role as a neutral index provider that should simply reflect market conditions rather than impose value judgments on different business models.

Excluding DATs, they contend, would lead to underrepresentation of a burgeoning economic segment and question the impartiality of MSCI's indices.

Misalignment with U.S. Digital Asset Strategy

Strategy further claims that MSCI's proposal contradicts the U.S. administration's focus on fostering innovation within the digital asset sector. This includes initiatives such as creating a Strategic Bitcoin Reserve and enhancing access to digital assets in retirement funds.

The firm warns that excluding DATs from major indices would restrict access to passive capital, stifle innovation, and diminish U.S. competitiveness in a sector of strategic importance.

In conclusion, Strategy urges MSCI to dismiss the proposal altogether, or at the very least, extend the consultation process for a more comprehensive evaluation as digital asset treasury models evolve. "The wiser course," they state, "is for MSCI to remain neutral and let the markets decide the future of DATs."