Strategy, previously referred to as MicroStrategy, has voiced strong disagreement with a proposal from Morgan Stanley Capital International (MSCI) to remove digital asset treasury companies (DATs) from its indexes.
Calls For Fair Treatment Of Digital Asset Companies
In a recent letter signed by Michael Saylor and CEO Phong Le, Strategy expressed its backing for MSCI’s initiative to implement consistent eligibility criteria across its indices.
Nonetheless, the company criticized the suggested exclusion threshold for firms that hold over 50% digital assets on their balance sheets, deeming it “misguided.” They contend that this measure could adversely impact not only Strategy’s operations but also the wider cryptocurrency market.
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Strategy highlighted that, in contrast to traditional investment funds, it possesses the operational flexibility to adapt its value-creation strategies in alignment with the evolving technology of Bitcoin.
The firm insists that this adaptability is a key advantage for investors, setting Strategy and other DATs apart from conventional digital asset investment vehicles.
It likened its investment strategy focused on a single asset class to that of real estate investment trusts (REITs) or oil companies, asserting that MSCI correctly categorizes these entities without branding them as investment funds. Therefore, it maintains that DATs deserve similar considerations.
‘Discriminatory And Arbitrary’
The letter criticized the 50% digital asset threshold as “discriminatory and arbitrary,” implying that it places uniquely unfavorable conditions on digital asset companies while permitting other sectors—such as oil, timber, and real estate—to maintain concentrated asset holdings without similar scrutiny.
Strategy expressed concerns that enforcing this rule would require MSCI to develop new metrics for assessing balance sheet concentration, complicating the indexing process unnecessarily due to differing accounting standards across asset classes and jurisdictions.
Moreover, Strategy elaborated on how excluding DATs could significantly stifle innovation in the digital asset sector, which the current administration promotes as part of its economic policy.
The company noted that digital assets like Bitcoin have the potential to become foundational components of global financial systems, yet the proposed measures could restrict access to these transformative technologies for pension funds and 401(k)s, ultimately diverting billions away from the industry.
Strategy warned that a hasty exclusion of DATs could stem from misconceptions about their business models, indicating a misunderstanding of the nature of these entities.
The firm urged a more thoughtful approach, similar to MSCI’s historical handling of the “Communication Services” sector, which underwent extensive consultation and evaluation before realigning traditional telecom, media, and internet companies.
Strategy Urges MSCI To Reconsider
If enacted, Strategy warns that MSCI’s proposal could result in the delisting of numerous companies deeply invested in digital assets. Analysts at JPMorgan estimate that Strategy alone could face liquidations totaling up to $2.8 billion as a direct result of this exclusion.
Such a change is also anticipated to distort market dynamics by motivating Bitcoin miners to liquidate their assets immediately rather than holding them as part of their business strategies.
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In light of these issues, Strategy urged MSCI to retract the proposal to exclude companies with over 50% digital asset holdings from its Global Investable Market Indexes.
The firm argued that the proposal is based on a flawed understanding of DATs and would impose conditions inconsistent with national interests, especially those advocating for the responsible growth of the digital asset industry.
As of this writing, the company’s stock, trading under the ticker symbol MSTR, is priced at $185. There has been little change since Tuesday’s trading session amidst stabilizing crypto values.
Featured image from DALL-E, chart from TradingView.com
