Strive, a structured-finance company listed on Nasdaq and a significant public corporate holder of Bitcoin, is actively opposing MSCI’s proposal to exclude companies with substantial Bitcoin holdings from major global equity benchmarks. The firm has formally communicated its objections in a letter addressed to Henry Fernandez, MSCI’s CEO. Strive asserts that the proposed exclusion would contravene the "long-established principle of index neutrality," arguing that such benchmarks should reflect the market for digital currency without imposing special rules based on a company's digital asset holdings.
Currently, Strive holds over 7,500 BTC, positioning it as one of the world's largest public companies with Bitcoin on its balance sheet. The company believes its background provides a unique perspective on the operational dynamics of Bitcoin-treasury companies and highlights how blanket exclusions could potentially distort market landscapes.
Strive Argues the 50% Threshold is Flawed
Strive's position emphasizes methodological concerns and fairness. The firm contends that the proposed 50% digital-asset threshold is unjustified, overly broad, and impractical. Strive argues that this rule fails to adequately account for the diverse nature of companies that now hold significant Bitcoin reserves. Many of these companies engage in activities beyond simply holding Bitcoin; they operate established businesses in sectors such as AI-driven data center infrastructure, structured finance, and broader digital asset financial services.
Furthermore, the company points out that other entities, including major mining operations like Marathon Digital, Riot Platforms, Hut 8, and CleanSpark, have diversified their operations. These companies now leverage their surplus power, computing capacity, and data center space by leasing it to cloud and hyperscale customers. Strive maintains that these companies are more substantial than their Bitcoin treasuries alone, and their exclusion from global benchmarks would eliminate significant real economic activity.
A technical challenge identified by Strive relates to the complexity of accounting standards. Under U.S. GAAP, digital assets are revalued to fair value each quarter. In contrast, under IFRS, utilized in many countries, companies can report digital assets at their historical cost. This discrepancy means that two companies with identical Bitcoin exposure might appear to have different levels of digital asset concentration, leading to disparate and inequitable treatment based solely on their financial reporting jurisdiction.
As an alternative, Strive proposes a more tailored approach. Instead of altering broad-index eligibility criteria, MSCI could introduce optional index variants, such as "ex-digital-asset-treasury" indexes. This would allow investors who wish to avoid Bitcoin-treasury companies to select these specific versions without imposing exclusions on all investors. MSCI already offers similar screened index versions, including "ex-energy" and "ex-tobacco."
Index Shift Threatens Billions in Market Flows
The outcome of this debate could significantly influence market perceptions and investment flows. If MSCI implements the 50% rule, the ramifications could be substantial. Strive, as the world's largest public holder of Bitcoin, would be excluded from indexes that collectively track trillions of dollars in global assets. Analysts project potential passive outflows of up to $2.8 billion from MSCI-tracked funds alone. This figure could rise to nearly $9 billion if other index providers follow MSCI's lead.
Market observers have noted that the potential impact may have already influenced Strive's share price volatility. While some analysts suggest that exclusion from an index would not force the company to divest its Bitcoin holdings, it could reduce passive demand from institutional investors who follow MSCI benchmarks. Strive itself has experienced significant price fluctuations since announcing its Bitcoin treasury strategy earlier this year through a reverse merger. Its stock price surged dramatically before experiencing a subsequent decline.
MSCI is anticipated to announce its decision on January 15, 2021, prior to the February index review. The outcome is being closely watched across the cryptocurrency, financial indexing, and institutional investment sectors.