Strategy Slams MSCI: 50% Crypto Ceiling ‘Discriminatory, Arbitrary, And Unworkable’

Michael Saylor’s Strategy has strongly criticized MSCI’s proposal to exclude firms holding more than 50% of their assets in cryptocurrency from its indexes. Strategy described the proposal as “discriminatory, arbitrary, and unworkable,” arguing that it undermines President Donald Trump’s objective of positioning the United States as the global leader in cryptocurrency.

In a letter addressed to the index provider and signed by founder Michael Saylor, Strategy asserted that the proposed change would damage MSCI’s reputation as an impartial market arbiter and introduce bias against crypto as an asset class. The letter stated, “It would undermine the federal government’s goal of promoting digital assets while stifling innovation, impeding economic development, and harming national security. This is precisely the wrong moment to take steps that undermine this innovative technology.”

CEO Phong Le further elaborated in a December 10 interview with Schwab Network, calling the move “misguided and misinformed.” He drew parallels to historical technological advancements, stating, “It would be like in the 1980s saying the telecom company shouldn’t have built out cell towers and spectrum, or three years ago saying AI companies shouldn’t be investing in LL labs and high-performance compute.”

Strategy’s letter highlighted that many operating companies currently included in MSCI’s indices invest heavily in a single asset class. For instance, oil and timber companies such as ExxonMobil and Weyerhaeuser possess substantial assets in their respective reserves, while Real Estate Investment Trusts (REITs) like Simon Property Group concentrate almost exclusively on real estate. The letter also pointed out, “Many financial institutions primarily hold certain types of assets and then package and sell derivatives backed by those assets (like residential mortgage-backed securities).”

Strategy Faces Potential Exclusion from MSCI Indexes Alongside Other Treasury Firms

Strategy’s strong reaction follows MSCI’s announcement in October regarding a consultation with the investment community. This consultation aims to determine whether to exclude Bitcoin and other digital asset treasury (DAT) firms that hold over 50% of their balance sheet in cryptocurrency.

MSCI has indicated that DATs exhibit characteristics similar to investment funds rather than operating companies that produce goods and services. The index provider also raised concerns about the lack of clear and uniform valuation methods for companies that have capitalized on cryptocurrencies. This, MSCI argues, complicates accounting practices and can potentially distort index values. A final decision on the matter is anticipated by January 15.

Several prominent crypto treasury companies are at risk of being removed from the indexes. Among those on MSCI’s shortlist are BitMine, a significant corporate holder of Ethereum, and MARA Holdings, a Bitcoin miner.

Data from Bitcoin Treasuries identifies Strategy as the largest DAT firm globally, with 660,624 BTC recorded on its balance sheet.

Strategy is also recognized as a pioneer of the crypto treasury trend, having commenced its Bitcoin purchases towards the end of 2020.

JPMorgan has estimated that Strategy’s exclusion from MSCI indexes could result in a loss of up to $12 billion in buying power for its stock (MSTR), particularly if other index providers follow suit. However, the firm believes the market impact of its potential exclusion is already factored into the current stock price. MSTR has experienced a 20% decline over the past month.

Cantor Fitzgerald recently reduced its price target for Strategy’s shares by 60%. Despite this adjustment, the firm maintained a “buy” rating for MSTR, suggesting that fears of a significant selloff are “overblown.”