- Bitwise opposes MSCI’s plan to remove Strategy from major global market indices.
- MSCI’s proposed 50% digital asset rule raises concerns about the neutrality of the index.
- Exclusion from indexes could lead to billions in forced selling by passive funds.
Bitwise has publicly criticized MSCI for its index rule proposal, which could downgrade Strategy to major international indices. The controversy is based on the categorization of organizations with large Bitcoin accounts. This move could impact investor access, passive fund flows and subsequent treatment of digital asset companies.
Bitwise, a digital asset fund manager, published his position on December 12. The company was responding to MSCI’s ongoing consultation on the index methodology. It was against reforms that would recategorize the companies, such as Strategy. Bitwise stated that these moves undermine the purpose of market indexes.
Bitwise calls for index neutrality during the MSCI evaluation
The company claimed that the indexes should be based on market structure, not business preferences. Bitwise claims that the proposal generated by MSCI provides a subjective assessment. It warned that this would mislead investors about the market. Bitwise said index neutrality should be the priority.
The controversy comes after MSCI rated Digital Asset Treasury companies. These companies have large amounts of digital assets on their balance sheets. The largest corporate Bitcoin holder, Strategy, is placed at the center of the assessment. This process started at MSCI in October.
MSCI’s 50% rule faces pushback from Bitwise
MSCI is considering implementing a 50% rule as part of the review. The proposal would eliminate companies whose digital assets make up at least half of total assets. MSCI considers these companies to be investment holding companies. This classification has been heavily criticized.
Bitwise disagreed with such reasoning. The company indicated that Strategy is a dynamic company, and not a passive investment vehicle. It also argued that exchange-traded products could not reproduce the structure of the Strategy. Bitwise concluded that Strategy has delivered shareholder value in its approach.
Also read: Strategy Inc. Opposes MSCI’s plan to exclude DATs from major indexes
The company also questioned the influence of investors. Bitwise claimed the offer would limit contact with digital asset leaders. Investors with passive funds would no longer have access to a booming industry, it warned. Bitwise believes that such an approach would disadvantage investors.
Strategy is being pushed back as Saylor calls the MSCI rule discriminatory
The strategy has chosen its own defense. During the consultation period, Chairman Michael Saylor was directly involved with MSCI. He described the proposed rule as discriminatory. Saylor stated that index standards must be in line with the global market revolution.
Strategy claims it is an operating company. The company claims that it uses Bitcoin as a means to support long-term stock returns. It refutes claims that its balance sheet characterizes it as a holding entity. Strategy says that innovation does not lead to exclusion.
Other companies have echoed these concerns. The MSCI has been urged by Strive, an investment company, to reconsider its proposal. Market analysts have also highlighted the potential risks associated with delisting. JPMorgan added that the fear of forced selling has already taken place in Strategy shares.
The pressure is still high due to the impact of MSCI. MSCI indexes track trillions of dollars worldwide. An elimination would lead to forced selling of index funds. Some projections indicate that the asset could sell for billions of dollars.
MSCI is expected to publish the decision on January 15. The result could impact the index providers’ treatment of digital-heavy companies. A positive decision could lead to greater adoption of digital assets. This exclusionary potential would slow passive investment across the sector.
Also read: Harvard University Buys More Bitcoin Than Gold, Says Matt Hougan Bitwise CIO
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