The potential exclusion of Bitcoin-heavy treasury and mining companies from MSCI’s global equity indices has sparked significant debate across the financial and investment sectors. Nasdaq-listed asset manager Strive has raised concerns over the proposed plan, emphasizing its harmful impact on both passive investors and market innovation.
MSCI’s 50% Bitcoin Threshold Rule
MSCI’s proposed threshold would exclude companies from its indices if digital assets like Bitcoin make up more than 50% of their total assets. A preliminary exclusion list released by MSCI includes Bitcoin mining giants and companies actively holding Bitcoin reserves, such as MARA Holdings and Riot Platforms. These firms play a pivotal role not only in blockchain infrastructure but also in cutting-edge AI solutions, striking multi-billion-dollar partnerships with technology leaders like Google and Microsoft.
Strive argues this blanket exclusion approach penalizes legitimate companies providing real-world products and services far beyond just holding Bitcoin. In contrast, traditional banking institutions like Goldman Sachs and JPMorgan, which offer Bitcoin-linked products, face no similar penalties.
The Role of Bitcoin Miners in Modern Technology
Interestingly, Bitcoin mining firms have expanded their horizons by supplying AI infrastructure to tech giants. Leveraging existing power contracts and state-of-the-art data centers, these collaborations reportedly amount to $10 billion in deals with companies such as Google, Microsoft, and Amazon.
Excluding these firms from MSCI indices could disconnect passive investors from one of the fastest-growing technology intersections spanning blockchain and AI. Moreover, Google and other major players have even taken equity stakes in their Bitcoin mining partners, showcasing confidence in their business models.
Accounting Concerns and Strive’s Proposal
An additional complication involves accounting standards. Under US GAAP, companies must adhere to fair value reporting for digital assets, while International Financial Reporting Standards (IFRS) use cost-basis accounting. This allows international firms to seemingly evade MSCI’s 50% rule, creating uneven exposure among indices.
Strive suggests that instead of blanket exclusions, MSCI could develop custom index variants—such as MSCI USA ex Digital Asset Treasuries—allowing investors to opt into diversified benchmarks while preserving neutral flagship indices. ESG-focused overlays and other detailed screening tools already exist to cater to specific investor preferences.
Broader Implications for Investors
The exclusionary approach would disproportionately affect passive investors who rely on MSCI indices to gain diversified exposure to global equities. Additionally, it risks stifling innovation, particularly in industries at the intersection of blockchain and emerging technologies like artificial intelligence.
For an informed choice in navigating this landscape, passive investors could consider products like the iShares Blockchain and Tech ETF by BlackRock, offering diversified exposure to technology and blockchain innovation.
In conclusion, as debates rage on, the future of digital asset integration into traditional financial benchmarks remains pivotal. Strive’s call to MSCI pushes for flexibility and fairness, ensuring that dynamic sectors like crypto and AI aren’t sidelined from market innovation.
