TLDR
- MSCI is considering excluding crypto treasuries from its index, which could create significant pressure on affected companies.
- The consultation period for the proposed exclusion of crypto treasuries is open until December 31 with a decision expected in mid-January.
- Crypto treasuries are companies that hold over 50% of their balance sheet in digital assets such as Bitcoin.
- Index-tracking funds would need to sell shares in affected companies, which could drive down market values.
- 38 companies, including major crypto miners, are under MSCI’s review for potential exclusion.
The MSCI Index is considering excluding crypto treasuries from its listings. This move could put substantial pressure on companies that hold significant Bitcoin (BTC) and other digital assets on their balance sheets. The consultation period is open until December 31, with a decision expected in mid-January.
MSCI Consultation and Potential Exclusion of Crypto Treasuries
The MSCI Index has been consulting with the investment community since October on the inclusion of crypto treasuries. The index focuses explicitly on companies with more than 50% of their balance sheet in digital assets. According to MSCI, some of these companies exhibit characteristics similar to investment funds, which are currently excluded from the index.
Charlie Sherry, Head of Finance at BTC Markets, believes the risk of exclusion is high. “The odds are solidly in favor of it,” Sherry said. He added that the MSCI only puts such changes out for consultation when they are likely to happen.
If MSCI moves forward with the exclusion of crypto treasuries, it will force index-tracking funds to sell their shares in these companies. This would create meaningful pressure on the affected companies, including crypto miners and firms like MicroStrategy. Sherry emphasized that many companies hold large amounts of crypto assets on their balance sheets, rather than deriving value from their core business.
MSCI’s review has raised concerns among crypto treasury companies. Many of these businesses have accumulated substantial crypto assets over the past few years. Exclusion from the MSCI could limit their access to institutional investors, potentially affecting their market valuations.
MSCI has identified 38 companies that could be affected by the proposed changes. These include crypto miners such as Riot Platforms and Marathon Digital Holdings, as well as companies such as MicroStrategy. The index will assess whether their business models align with traditional equity benchmarks or if they primarily hold digital assets for investment purposes.
The current debate also includes whether companies that define themselves as crypto treasuries should be treated differently. Some stakeholders have questioned whether raising capital to accumulate crypto assets qualifies as a business activity. This input is being considered as MSCI finalizes its decision.
Other Index Providers Could Follow MSCI’s Lead
At this stage, it is uncertain whether other index providers will adopt similar measures. Sherry noted that while MSCI’s decision could influence others, each index provider has its own methodology. While there is a precedent for stricter views, especially with S&P’s treatment of MicroStrategy, other indexes may not take the same approach.
However, if MSCI proceeds with its exclusion, it could encourage other indexes to review their own rules. Whether that leads to a broader trend remains uncertain.
Sherry also pointed out that more explicit rules for corporate classifications can ultimately benefit the space. A well-defined framework removes uncertainty for investors and issuers. Understanding how crypto assets on corporate balance sheets will be treated can strengthen long-term institutional confidence.
The clarity that MSCI’s decision could provide might help shape the future regulatory landscape for crypto treasuries. Despite the potential short-term impact, clearer regulations could bring stability to the crypto market.
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