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

MSCI, a major index provider, is considering a rule that would exclude public companies from its Global Investable Market Indexes if digital assets constitute 50% or more of their total assets. Critics argue this proposal fundamentally misclassifies operating companies as investment funds based solely on a balance sheet ratio, ignoring core business activities like revenue generation and employment. This approach is seen as a radical departure from historical index practice, which relies on operational reality, revenue sources, and earnings contribution. Furthermore, the rule uniquely singles out digital assets, as similar thresholds for real estate or equities would not trigger exclusion, violating the principle of index neutrality. The proposal also introduces structural instability, as normal market appreciation of digital assets could cause companies to flip in and out of indexes, creating unnecessary costs and tracking error for index-linked funds. Market participants, advocating for consistent treatment, are urging MSCI to withdraw the proposal and develop a multi-factor, principles-based framework that evaluates the entire business rather than relying on a single, volatile metric.

(Source：Bitcoin Magazine)