The index provider MSCI, which compiles numerous global equity indices such as the MSCI World and MSCI Emerging Markets, has for the time being decided not to pursue its original proposal to remove companies with large crypto holdings from its indices.
MSCI had considered excluding so-called Digital Asset Treasury Companies (DATCOs) - companies in which digital assets account for more than 50% of total assets - from its major equity indices. This proposal has now been put on hold for the time being. Instead, MSCI will initiate a broader consultation and analysis process to define criteria for the inclusion or classification of non-traditional operating companies.
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Background of the proposed exclusion
MSCI’s original plan aimed to remove companies with a strong focus on digital assets, particularly Bitcoin, from the most important global indices. MSCI defined DATCOs as companies whose crypto holdings account for at least 50% of total assets. This definition would have significantly affected firms such as Strategy Inc. (formerly MicroStrategy), which holds a large portion of its value in Bitcoin. The consequence of an exclusion would have been that passive funds tracking MSCI indices would have been forced to sell these stocks, potentially triggering substantial capital outflows and valuation pressure.
MSCI has decided not to implement the exclusion at this stage. Instead, all currently identified DATCOs will remain in the indices for now. In response to the announcement, shares of Strategy Inc. rose sharply in after-hours trading once it became clear that the company would not be removed from the index in the near term. Investors had feared that an exclusion could have led to massive sell-offs by index-linked funds.
However, MSCI emphasized that this is not a permanent decision. Rather, the goal is to conduct a more thorough analysis of how companies with unusual asset profiles should be classified. MSCI therefore plans a comprehensive consultation with market participants and the development of new criteria, potentially based on balance sheets and operating business models, before making a final decision.
Economic and market-wide significance
The decision is relevant for several reasons: MSCI indices serve as benchmarks for a substantial amount of passively managed capital. ETFs and funds that replicate these indices invest billions in the underlying securities. An exclusion from such an index can therefore trigger so-called forced selling, putting pressure on the liquidity and valuation of the affected stocks. At the same time, the announced broad review highlights that traditional index providers are increasingly grappling with how to structurally classify novel corporate models, such as companies with large digital asset positions.
MSCI’s decision should not be interpreted as a definitive all-clear for crypto-heavy companies. Rather, it signals that the definition of corporate and index criteria is evolving. The announced broad review could result in new guidelines aimed at more clearly distinguishing between operating companies and investment vehicles. Market observers will closely monitor how this process unfolds in the coming months and what impact new index rules may have on crypto treasury companies’ access to global capital flows.
