9 Ways MSCI's Proposed Digital Asset Rule Could Undermine Index Neutrality

"A major rule change is being considered by MSCI, one of the most influential index providers in global markets. If adopted, it would materially alter how public companies that hold digital assets-particularly Bitcoin-are classified and included in major equity indexes. For companies, investors, asset managers, and anyone who depends on index-based benchmarks, this proposal raises fundamental questions about how markets define operating businesses and what role balance sheets should play in index eligibility."

"At the center of the proposal is a simple rule: If digital assets make up 50% or more of a company's total assets, that company would be excluded from MSCI's Global Investable Market Indexes. MSCI's rationale is that crossing this threshold allegedly changes the company's "primary business," making it more fund-like rather than operational. This single ratio would override all other indicators of what the company actually does."

"The core objection is straightforward:holding Bitcoin on a balance sheet does not transform an operating company into an investment fund. By contrast, investment funds exist solely to manage portfolios for return. Treating these two structures as equivalent-based on a balance-sheet ratio alone-collapses a distinction that has long been foundational to corporate and securities law. If your organization relies on clear, fundamentals-based definitions of operating companies, this misclassification matters."

MSCI proposes excluding any company whose digital assets constitute 50% or more of total assets from its Global Investable Market Indexes. MSCI says crossing that threshold shifts a company's primary business toward being fund-like rather than operational. The rule would apply solely based on the balance-sheet ratio, overriding other indicators of operations. Critics argue holding Bitcoin as treasury or excess capital does not convert an operating company into an investment fund. Critics contend investment funds exist to manage portfolios for return and that treating operating companies as funds collapses long-standing corporate and securities law distinctions. Advocates ask MSCI to withdraw the rule and engage on a principled framework.

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