Strive's Appeal to MSCI
Strive Asset Management has formally urged MSCI to reconsider its proposed exclusion of Bitcoin treasury companies from its global equity indices. This action comes amid concerns over MSCI's 50% digital-asset holdings threshold. Strive advocates for market determination regarding the inclusion of these companies.
The decision could impact equity flows and corporate Bitcoin reserves, influencing market access to public Bitcoin exposure but not forcing asset liquidation.
Concerns Over Index Neutrality and Market Choices
Strive, a major Bitcoin treasury firm holding over 7,500 BTC, challenges MSCI's CEO Henry A. Fernandez, warning against the potential departure from index neutrality. Strive requests the creation of "ex-digital-asset treasury" index variants to provide better options for investors. In his engagement letter, Fernandez noted that "Strive characterizes MSCI’s 50% digital-asset holdings threshold as 'unjustified, overbroad and unworkable'."
Implications for Cryptocurrency Markets and Equity Flows
The implications of MSCI's decision extend to cryptocurrency markets. Strive believes excluding firms like itself and others could distort passive equity flows. Their commentary highlights the potential for high index turnover and unstable membership.
Jurisdictional Inconsistencies and Accounting Differences
MSCI's consideration could affect industries and markets by creating jurisdictional inconsistencies. Strive notes differences between U.S. GAAP and IFRS accounting for digital assets, which may skew index applications globally.
Broader Financial, Regulatory, and Investor Dynamics
The debate over index inclusion reflects broader financial, regulatory, and accounting dynamics. Strive highlights the risk of equity investors losing exposure to Bitcoin through misclassification. The firm calls for investor choice in valuing BTC holdings.
Potential Outcomes and Historical Context
Potential outcomes include existing firms being treated as investment funds rather than operations due to Bitcoin holdings. Historical insights from similar index methodology challenges emphasize the balance between neutrality and thematic exclusions.