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

A significant rule change is currently under consideration by MSCI, a prominent index provider in global markets. This proposed change could have a substantial impact on how public companies that hold digital assets, particularly Bitcoin, are categorized and included in major equity indexes.

For various stakeholders such as companies, investors, asset managers, and those who rely on index-based benchmarks, this proposal raises essential questions about the definition of operating businesses in markets and the role that balance sheets should play in determining index eligibility.

The crux of the proposal revolves around a new rule that states if digital assets represent 50% or more of a company’s total assets, that company would be excluded from MSCI’s Global Investable Market Indexes. The rationale behind this threshold is the belief that crossing it alters the company’s primary business, making it more fund-like rather than operational. This single ratio would override all other indicators of the company’s actual operations.

However, a core objection to this proposal is that holding Bitcoin on a balance sheet does not transform an operating company into an investment fund. Operating companies generate revenue from products and services, employ individuals, invest in research and development, and serve customers. Treasury assets are meant to support long-term capital strategies, not redefine core business activities.

Treating operating companies and investment funds as equivalent based solely on a balance-sheet ratio collapses a distinction that has long been foundational to corporate and securities law. This misclassification can have significant implications for organizations that rely on clear, fundamentals-based definitions of operating companies.

Moreover, the proposal conflicts with decades of index practice, where the classification was historically driven by operational reality rather than asset composition alone. The proposed rule would introduce structural instability into indexes, leading to unnecessary rebalancing, costs, and tracking errors for index-linked funds.

In response to this proposal, market participants are urging MSCI to withdraw the current rule and engage with the market to develop a neutral, principles-based framework that preserves index integrity. The goal is to ensure consistent treatment aligned with long-standing market norms.

Ultimately, the integrity of indexes relies on clear principles rather than price-driven thresholds. By engaging in this process, stakeholders can help ensure that global benchmarks remain neutral, stable, and representative for everyone who depends on them.