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

Michael Saylor’s Strategy slammed MSCI’s proposal to exclude from its indexes firms that hold more than 50% of their assets in crypto as “discriminatory, arbitrary, and unworkable,” and said it undermines President Donald Trump’s goal of making the US the crypto capital of the world.

In a letter to the index provider signed by founder Saylor, Strategy said the proposed change would negatively impact MSCI’s reputation as a neutral arbiter in the market and bias it against crypto as an asset class. 

”It would undermine the federal government’s goal of promoting digital assets while stifling innovation, impeding economic development, and harming national security,” it said. ”This is precisely the wrong moment to take steps that undermine this innovative technology.”

CEO Phong Le added in a Dec. 10 interview with Schwab Network that the move would be ”misguided and misinformed.”

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,” he said.

Strategy’s letter said many operating companies included in MSCI’s indices invest heavily in a single asset class. Oil and timber companies like ExxonMobil and Weyerhaeuser have a significant portion of their assets in oil and timber reserves, it said, while REITs like Simon Property Group invest almost exclusively in real estate.

”Many financial institutions primarily hold certain types of assets and then package and sell derivatives backed by
those assets (like residential mortgage-backed securities),” it added.

Strategy On MSCI’s Shortlist With Several Other Treasury Firms

Strategy’s broadside comes after MSCI announced in October that it was consulting with the investment community about whether to exclude Bitcoin and other digital asset treasury (DAT) firms that have more than 50% of their balance sheet in crypto. 

According to MSCI, DATs show characteristics of investment funds, rather than operating companies that produce goods and services. 

It added that companies that have capitalized on cryptos lack clear and uniform valuation methods. This, MSCI argued, makes proper accounting of these companies a challenging task and potentially skews index values. A decision is scheduled for Jan. 15. 

Several crypto treasury companies are at risk of being removed. Firms on MSCI’s shortlist include leading corporate Ethereum holder BitMine, and BTC miner MARA Holdings.

Strategy is the largest DAT firm globally with 660,624 BTC on its balance sheet, data from Bitcoin Treasuries shows. 

Strategy BTC holdings (Source: Bitcoin Treasuries)

Strategy is also considered the pioneer of the crypto treasury trend, and started purchasing BTC towards the end of 2020. 

JPMorgan says its exclusion from MSCI indexes could lead to up to up to $12 billion in lost buying power for Strategy’s stock (MSTR) if other index providers also excluded it.

But it says the impact of its potential exclusion is already priced in. MSTR has fallen 20% in the past month

Cantor Fitzgerald last week slashed its price target for Strategy’s shares by 60%, but maintained a “buy” rating for MSTR and said fears of a selloff are ”overblown.”