MSCI Once Again Raised Issue of Excluding Crypto Treasuries from Global Indexes

Companies That Could Be Removed From MSCI Indexes

As part of its review of the MSCI ACWI IMI index, the company identified three potential removals — Strategy, Yellow Cake, and Metaplanet. 

Three more companies could be added to a new public watchlist — Center Laboratories, Lydia Holding, and SharpLink.

For current MSCI index constituents, MSCI proposes applying an additional safeguard: a company must fail to meet the criteria for two consecutive annual periods before it is removed. For companies not yet included in the index, one period is enough to deem them ineligible.

Criteria Proposed by MSCI

The methodology consists of two stages. First, a company must pass the Core Screen, under which operating assets must account for more than 50% of total assets. If it does not meet this requirement, an additional Exclusion Screen is applied, using five financial metrics.

A company will be deemed ineligible for inclusion in the index if at least four out of five criteria are triggered:

• Operating assets account for less than 20% of total assets
• Operating expenses are less than 5% of assets
• Operating cash flow is negative
• The share of non-operating fair value changes exceeds MSCI’s set thresholds
• The company is heavily reliant on capital raising to accumulate assets

The last criterion, in particular, is one of the key ones for companies that use capital raising to buy crypto assets.

Previously, JPMorgan estimated that even the potential removal of Strategy alone could have triggered outflows of up to $8.8 billion, while DAT supporters’ estimates suggested potential outflows of $10 billion–$15 billion in the event of a broader exclusion of such companies.