A cryptocurrency coalition that represents digital asset treasury firms has called for a uniform standard when it comes to the inclusion of these companies into the MSCI index, as per a press release by BTC media.
The coalition represents several companies that will be affected by the proposal if implemented.
The industry challenge comes as a response to the proposal of excluding crypto treasury companies, where digital assets represent more than 50% of total assets.
The crypto coalition wants the MSCI to use a different framework for identifying grounds for exclusion, citing three flaws in the financial index provider’s proposal: defining the business according to its holdings and not its main operating segment, focusing on one single asset class when defining a company’s core model, and the possible rapid inclusion and exclusion of DATs due to the volatiliy of cryptocurrency
“MSCI has long defined companies by what they do, not by what they hold. This proposal abandons that principle for a single asset class,” said Managing Director of Bitcoin for Corporations George Mekhail
He also said that the organization’s member companies manage real businesses and that simply having a decision approved by shareholders to run a treasury shouldn’t “override that reality,”
The MSCI first sounded the alarm on DATs in October
The financial index provider previously raised concerns in October over heightened exposure to cryptocurrency through digital asset firms that hoard large amounts of Bitcoin and Ethereum, and said that they may delist all such firms from their indexes.
The initial announcement targeted a total of 39 digital asset treasury firms, including Strategy, Metaplanet, Sharplink Gaming, Semler Scientific, H100, and others.
MSCI’s main concern lies in the overreliance on cryptocurrency, where DATs hold large amounts of cryptocurrency and not enough cash reserves in proportion to digital assets, creating a composition of stocks that is not diversified well enough to reflect the real-world market.
The potential consequences of MSCI’s delisting of firms in the digital asset market could be huge, potentially leading to $2.8 billion in selling pressure on Strategy and $11.6 billion in total outflows, as per JPMorgan estimates.
The bulk of cryptocurrency firms have opted to hold on to their cryptocurrency in this environment, with Strategy’s executive chairman, Michael Saylor, saying in an exclusive interview with CoinHeadlines at Binance Blockchain Week that he will be holding on to his Bitcoin.
However, the recent crypto dip in November has spurred speculation on what the largest BTC treasury firm will be doing in terms of major dips in price. CEO Phong Le has said that the company will only sell its Bitcoin if its mNAV (stock’s market value to net asset value) value falls below 1 and the firm is unable to raise new capital.