Strategy Calls For Withdrawal Of MSCI’s Exclusion Plan For Digital Asset Treasury Companies

Strategy, previously often called MicroStrategy, has expressed sturdy opposition to a proposal by the Morgan Stanley Capital International (MSCI) to exclude digital asset treasury firms (DATs) from its indexes. 

Calls For Fair Treatment Of Digital Asset Companies

In a latest letter signed by Michael Saylor and the agency’s CEO Phong Le, Strategy highlighted its assist for MSCI’s efforts to determine constant eligibility standards throughout its indices. 

However, the corporate criticized the proposed threshold for excluding companies with greater than 50% digital belongings on their steadiness sheets, calling it “misguided.” The firm argued that this measure might have unfavourable implications not just for Strategy’s operations but in addition for the broader cryptocurrency market.

Strategy emphasised that, in contrast to conventional funding funds, it maintains the operational agility to adapt its value-creation methods in tune with the evolving know-how underlying Bitcoin. 

The agency asserts that this flexibility is a vital asset for buyers and distinguishes Strategy and different DATs from conventional digital asset investment vehicles. 

The agency likened its funding strategy in a singular asset class to that of actual property funding trusts (REITs) or oil firms, stating that MSCI categorizes these entities accurately with out labeling them as funding funds. Therefore, it argued, DATs ought to be afforded comparable therapy.

‘Discriminatory And Arbitrary’

The letter criticized the proposed 50% digital asset threshold as “discriminatory and arbitrary,” suggesting that it imposes uniquely unfavorable circumstances on digital asset firms whereas permitting different industries—like oil, timber, and actual property—to keep up concentrated asset holdings with out comparable scrutiny. 

Strategy raised issues that implementing this rule would necessitate MSCI to create new strategies for measuring balance sheet concentration, complicating the indexing course of unnecessarily resulting from various accounting ideas throughout asset lessons and jurisdictions.

Additionally, Strategy elaborated on how the exclusion of DATs might considerably inhibit innovation inside the digital asset business, which the present administration strongly promotes as a part of its financial technique. 

The firm mentioned that digital belongings like Bitcoin have the potential to turn out to be foundational components of worldwide monetary techniques, however the proposed measures might restrict entry to those transformative applied sciences for pension plans and 401(ok)s, in the end redirecting billions away from the sector.

Strategy cautioned {that a} hasty exclusion of DATs may very well be based mostly on misconceptions about their enterprise fashions, asserting that it displays a misunderstanding of the character of those entities. 

The agency advocated for a extra measured strategy just like MSCI’s previous dealing with of the “Communication Services” sector, which underwent in depth session and a radical evaluation earlier than reorganizing conventional telecom, media, and web firms.

Strategy Urges MSCI To Reconsider

If applied, Strategy warns that MSCI’s proposal might result in the delisting of quite a few firms closely concerned in digital belongings. JPMorgan analysts estimate that Strategy alone may face liquidations of as much as $2.8 billion as a direct consequence of this exclusion.

Such a transfer can also be anticipated to doubtlessly distort market dynamics by incentivizing Bitcoin miners to promote their belongings instantly as an alternative of holding them as a part of their enterprise technique.

In mild of those issues, Strategy urged MSCI to withdraw the proposal for excluding firms with over 50% digital asset holdings from its Global Investable Market Indexes. 

The agency asserted that the proposal is rooted in a flawed understanding of DATs and would impose circumstances unaligned with nationwide pursuits, notably these advocating for the accountable development of the digital asset house.

As of this writing, the corporate’s inventory, buying and selling beneath the ticker image MSTR, is buying and selling at $185. There has been virtually no distinction since Tuesday’s buying and selling session amid consolidating crypto costs. 

Featured picture from DALL-E, chart from TradingView.com