A proposal by global index provider MSCI to exclude companies holding large portions of their balance sheets in digital assets could force between $10 billion and $15 billion in passive outflows as early as February 2026, according to an analysis of the consultation now underway.
In October, MSCI began soliciting feedback on whether companies whose crypto holdings equal 50% or more of total assets should be removed from its Global Investable Market Indexes.
What Happened
A preliminary list identifies 39 companies, including 18 existing constituents and 21 firms currently outside the index universe, that would be barred from future inclusion.
The combined float-adjusted market capitalization across the affected group totals $113 billion, with U.S. companies representing 92% of total exposure.
One firm alone, Strategy, accounts for $84.1 billion, or nearly three-quarters of the total capital impact, making it the single largest source of potential index turnover.
Analysts warn that the exclusion framework diverges sharply from MSCI’s established benchmark principles, which emphasize neutrality, representativeness and low turnover.
The consultation documents highlight that no comparable restrictions exist for companies holding concentrated amounts of other asset types such as gold, cash, or foreign currency reserves.
They also note the precedent within MSCI indexes for including entities with highly concentrated balance sheets, such as REITs and diversified holding companies.
If implemented as drafted, the policy change would require the forced removal of current constituents during the February 2026 Index Review.
MSCI’s own structure suggests that passive funds tracking the affected benchmarks, including MSCI USA, World, ACWI, Japan, Europe and EM, would have no discretion to stay invested, leading to what the report defines as “material investor harm.”
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Estimated costs include:
• $10–$15 billion in passive selling pressure • Turnover costs of $50M–$225M across MSCI-linked index products • Tracking error ranging from 15 to 150 basis points depending on market volatility • Permanent exclusion for the 21 non-constituent companies that would be barred from ever entering the index
Why It Matters
Critics argue that the proposal would reduce index representativeness and undermine replicability for funds mandated to track MSCI benchmarks tightly, particularly for institutional portfolios operating under strict tracking-error limits.
The document also challenges MSCI’s rationale for analogizing these firms to “fund-like entities,” stating that the affected companies are operating businesses whose digital asset strategies are part of their treasury management—not passive investment vehicles.
Several alternative approaches are outlined, including enhanced disclosure labels, sector reclassification, liquidity-based screens, and phased weighting adjustments, each designed to preserve transparency without triggering billions in forced selling.
MSCI is expected to announce its decision on January 15, 2026, with implementation scheduled for February 2026 if the exclusion is approved.
The outcome is now considered one of the most consequential benchmark decisions in recent years, with potential knock-on effects for global equity markets, digital-asset-exposed firms, and passive investment vehicles worldwide.
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