Strive Asset Management has expressed serious concerns over a recent proposal by MSCI regarding the categorization of digital asset treasury firms. The index provider, MSCI, proposed reclassifying public companies primarily engaged in holding cryptocurrencies, such as Bitcoin, as “funds” rather than operational businesses. This proposal, announced on October 10, could lead to the exclusion of numerous companies from MSCI’s benchmarks if their digital asset holdings surpass 50% of total assets.
Background on Digital Asset Treasuries
Digital asset treasury firms have seen substantial growth, with more than $180 billion now held in cryptocurrencies by public companies. This classification shift has alarmed the sector, particularly affecting major players like Michael Saylor’s Strategy, which experienced a share price drop of about 20% following the announcement. Companies involved in this space include significant entities like MARA Holdings, Riot Platforms, and Hut 8, which are now diversifying into AI infrastructure.
Strive’s Response
Strive Asset Management, co-founded by Vivek Ramaswamy, has taken a definitive stance against MSCI’s proposal. The firm, which holds $704 million in Bitcoin, submitted a detailed letter to MSCI’s CEO, Henry Fernandez. Strive argues that this move undermines the foundational principle of passive investing, asserting that MSCI should maintain neutrality and accurately represent the equity universe.
- Arguments Presented by Strive:
- The reclassification could hinder innovation in the U.S. markets.
- MSCI’s proposed 50% threshold is challenging to enforce due to Bitcoin’s volatility.
- Shifts in asset classification based on different accounting principles can create discrepancies between companies.
Concerns Over Competitive Pressure
Industry experts suggest that MSCI’s proposal may reflect competitive pressure rather than a philosophical stance. With increasing competition from S&P and Russell, maintaining index relevance is crucial. Bitcoin’s inherent volatility has raised concerns about its suitability in benchmarks.
Response from Financial Experts
Some financial analysts disagree with Strive’s viewpoint, arguing that digital asset treasury firms do not qualify as operational entities. They assert that owning products does not constitute active business operations. Critics suggest that treating these companies like investment funds could prevent issues related to double-counting in index measurements.
Upcoming Decision from MSCI
MSCI is expected to announce its final decision on January 15. A reversal of the proposal could bolster confidence in Bitcoin investments, while maintaining the proposal might suppress growth and demand for publicly traded crypto firms.
As the debate continues, the future of digital asset treasury firms hangs in the balance, highlighting the need for clarity in classification and regulation within this rapidly evolving sector.
