Pushback at the Index: How a Crypto-Treasury Firm Is Fighting to Be Counted

Why Strategy pushed back and why passive investors should care

Strategy said recently that MSCI’s guidance on excluding firms with large digital-asset treasuries is wrong-headed, and the firm formally asked MSCI to rethink or clarify its approach. The company’s letter — sent to the index provider and shared with investors — argues that firms holding significant amounts of bitcoin and other tokens are not merely custodial shells but operating businesses whose shares belong in broad equity benchmarks.

For investors, this fight is not academic. MSCI’s decisions shape which names end up inside major indexes and the funds that track them. If MSCI excludes a group of companies, passive funds and ETFs that follow MSCI rules would need to avoid or sell those stocks. The opposite is true if MSCI accepts Strategy’s argument: excluded firms could see sizeable inflows simply because index funds buy to match benchmark weights. That can change stock liquidity, drive volatility and alter how those companies are valued.

How MSCI decides who belongs: the rules, the note that sparked this, and past examples

Index providers like MSCI use a mix of quantitative and qualitative tests to decide what gets included. They look at how a company makes money, the stability and source of revenue, listing and liquidity rules, free float, and whether the security represents an operating business rather than a passive holding vehicle. Recent guidance from MSCI — framed as clarifying how it treats firms with material crypto treasuries — signaled tighter scrutiny of companies whose market value depends heavily on a single digital asset.

That kind of line-drawing isn’t new. Indexes have long wrestled with single-asset or single-product companies: think of trusts or royalty vehicles whose assets are mostly one mine or one pipeline, or commodity producers whose prices track a single resource. In some cases, index committees have allowed such names when the business runs active operations, reports regular earnings, and meets liquidity thresholds. In others, they’ve been kept out when the entity is effectively a wrapper around an asset rather than an ongoing enterprise.

Strategy’s case: why crypto-treasury firms are operating companies, not asset shells

Strategy argues it operates like a normal listed company: it runs active businesses, earns revenues from services such as custody, staking, trading or mining, and makes investment decisions about its treasury. The firm pointed to audited holdings, public governance, and ongoing operational expenses as evidence that its balance sheet is an input to running a real company, not the whole business.

The letter also compares crypto-treasury firms to long-established single-asset public companies. Those companies are often accepted if they report regular cash flow, disclose operating metrics and show independent governance. Strategy says the right test for MSCI is economic substance — whether shareholders are buying exposure to a management team executing a strategy, rather than merely holding the asset under the corporate name.

On legal and technical grounds, the merits are mixed. Index providers have wide discretion and will look beyond form to substance, but they also must apply consistent, defensible rules that passive managers can follow. Strategy’s argument is strong if it can show recurring operating revenues and clear separation between treasury assets and corporate operations. Where it is weaker is if a firm’s market value is overwhelmingly explained by the crypto reserves rather than operating profits — that tends to push index committees toward exclusion.

How an inclusion or exclusion would ripple through funds, flows and prices

If MSCI reverses course and adds these firms to relevant benchmarks, the immediate effect would be mechanical: passive funds tracking those indexes would buy the stocks to match new weights. For smaller-cap names, that can mean concentrated, fast inflows that lift prices sharply. Larger companies would see steadier demand but still benefit from additional passive allocation.

On the flip side, a formal exclusion entrenches the status quo. Active managers and crypto-focused funds would remain the main holders, and those stocks could trade at a discount relative to peers because broad passive demand is absent. Either outcome affects benchmark tracking error — funds that track MSCI will have to rebalance, potentially creating short-term volatility for affected names and carrying implications for liquidity and bid-ask spreads.

There’s also a secondary effect: if equity indexes start recognizing crypto-treasury firms, some traditional funds may need to rethink sector or industry classifications, and derivative markets may see new hedging flows tied to the reweighted indices.

Who else is watching and what the next steps look like

MSCI has not publicly reversed its guidance yet. Other index providers will be watching closely and may publish their own criteria or clarifications; some may take a stricter line, others a looser one. Regulators — particularly those focused on market structure and disclosures — are also paying attention because index decisions can shift investor flows rapidly.

The usual path is consultation and a review window. MSCI could open a commentary period, revise its methodology, or decide case-by-case inclusion. Any formal change would likely take weeks to months, during which market participants will map scenarios and position accordingly.

What investors and portfolio managers should be watching now

For anyone with exposure or interest in these firms, the sensible checklist is simple and practical. First, track disclosures: how much crypto is on the balance sheet, how it’s valued, who audits it, and whether the company reports operating revenue separately from investment gains. Second, watch liquidity and free-float metrics that index committees use — thinly traded names are harder to include without market disruption.

Third, model scenarios: what would a modest or aggressive MSCI inclusion mean for flows into and out of the stock? Fourth, demand clarity on treasury policy — how does management hedge, when do they rebalance, and what governance protects shareholders from concentration risk? Finally, flag red lines: mixed accounting treatments, opaque custody arrangements, or reliance on one token for most market value are signs that index inclusion will face an uphill fight.

Bottom line: this dispute is as much about index philosophy as it is about any single company. Investors should expect more debate, targeted disclosure demands, and potential short-term price swings as index owners and fund managers react.

Photo: Karola G / Pexels

Sources

• cointelegraph.com
• newyorkfed.org
• cointelegraph.com