Key Insights
- Strategy, formerly MicroStrategy, submitted a 12-page letter on December 10 challenging MSCI’s proposal to exclude digital asset treasury companies from its Global Investable Market Indexes.
- The company argued that it operates as an active business rather than a passive fund, comparing its model to those of banks and insurance companies.
- MicroStrategy warned that the exclusion would discriminate against digital assets and conflict with the Trump Administration’s pro-crypto policies.
Strategy (formerly MicroStrategy) mounted an aggressive defense of its business model in response to MSCI’s proposal to exclude companies with digital asset holdings exceeding 50% of total assets from major equity indexes.
The December 10 letter, signed by Executive Chairman Michael Saylor and CEO Phong Le, rejected MSCI’s characterization of digital asset treasury companies as investment funds and warned the exclusion would stifle innovation while conflicting with federal policy.
Operating Company, Not Investment Wrapper
Strategy’s central argument centered on its operational structure. The company insisted it actively uses Bitcoin holdings to create returns rather than passively holding the asset.
Strategy provides Bitcoin-backed digital credit instruments, including preferred stock with varying dividend rates, seniorities, and credit protections.
The company uses proceeds from these instruments to acquire additional Bitcoin, capturing the spread between financing costs and Bitcoin returns.
The letter drew parallels to centuries-old business models. Strategy compared its approach to banks and insurance companies that hold concentrated asset portfolios and package derivatives backed by those holdings.
The company noted that investors purchasing Strategy stock buy exposure to management’s ability to leverage Bitcoin reserves rather than Bitcoin price exposure alone.
Additionally, the document stressed that share prices had historically traded at multiples above the underlying Bitcoin value to support its argument.
Strategy pointed to its corporate structure as proof of operating company status. The Delaware corporation maintains shareholder-elected board governance, discretionary capital allocation authority, and corporate-level taxation.
The company offers no redemption rights, charges no fund-style management fees, and operates under no mandate to hold Bitcoin or track any benchmark.
Bitcoin’s commodity status exempts Strategy from Investment Company Act registration requirements.
Discrimination Against Digital Assets
The letter accused MSCI of arbitrary discrimination by singling out digital asset companies while ignoring similar concentration in other sectors.
Strategy examples of businesses with heavy single-asset concentration that face no similar restrictions, such as oil and gas companies, mining firms, real estate investment trusts, and intellectual property holders.
Furthermore, Strategy warned that the proposed 50% threshold created unworkable implementation challenges.
Digital asset price volatility could force companies in and out of indexes based on market fluctuations rather than business changes.
Fair value versus book value discrepancies, indirect holdings through subsidiaries, and differences in accounting standards between GAAP and IFRS would lead to inconsistent treatment.
International companies using IFRS cost accounting for Bitcoin could remain under the threshold, while USUS GAAP companies using fair value accounting could not.
Federal Policy Alignment
Strategy cited the President Donald Trump Administration’s digital asset initiatives in support of its position.
First, the letter cited Executive Order 14178, which promotes digital financial technology and establishes a Strategic Bitcoin Reserve. Then, it added Executive Order 14330, which democratized access to alternative assets in 401(k) plans.
Strategy also argued that MSCI’s proposal directly contradicted federal efforts to position the US as a leader in digital asset technologies.
The company warned that the exclusion would deny pension plans and retirement accounts access to digital asset exposure, hurting the Administration’s policy.
The document also noted federal banking regulators had ended hostile treatment of digital assets under the prior Administration, condemning coordinated debanking efforts.
The letter framed MSCI’s proposal as a return to discrimination that federal policy had reversed.
Index Neutrality Concerns
Strategy challenged MSCI’s role as a neutral index provider, quoting MSCI’s stated mission to provide comprehensive market coverage without passing judgment on whether investments are good or bad.
By creating a digital asset-specific exclusion criterion, Strategy argued MSCI would inject policy considerations into index construction and undermine perceived neutrality.
The company warned that the proposal would structurally underrepresent digital assets despite Bitcoin’s $1.85 trillion market capitalization.
Strategy compared the move to discredited ESG-focused investment policies, suggesting fiduciaries could question whether MSCI indexes remained consistent with fiduciary duties if subjective value judgments influenced composition.
MSTR’s price is up by 0.4% following the letter’s release, avoiding broader declines in cryptocurrency-related stocks, including Coinbase, down 1.68%, and Gemini, down 5.72%.
Since MSCI opened the consultation on October 10, MSTR price has declined nearly 40%. Yet Bitcoin fell 24% over the same period, complicating the attribution of the decline solely to index-exclusion concerns.
JPMorgan estimated that the MSCI removal could trigger up to $2.8 billion in liquidations of Strategy stock if other index providers followed suit.
Strategy’s letter requested extended consultation if MSCI remained inclined to treat digital asset treasury companies differently, arguing that the rushed timeline provided insufficient time for industry evolution and stakeholder input.