MSCI announced that it will "not remove the treasury company from the index for the time being," and MSTR and others "escaped a disaster."

Global index provider MSCI announced that it will maintain its current index treatment for so-called "cryptocurrency treasury companies," meaning that companies like MicroStrategy, which consider Bitcoin as a core asset, will temporarily avoid removal from the index.

On Tuesday, MSCI stated in a declaration that it will maintain the existing index treatment for companies holding cryptocurrency amounts exceeding 50% of their total assets, meaning that treasury companies will not be removed from the index for the time being.

MSCI pointed out that cryptocurrency treasury companies (DATCOs) possess characteristics of investment funds, with their business activities primarily oriented towards investment rather than operations. As an alternative, MSCI revealed plans to initiate broader consultations to explore how to treat non-operating companies.

Strategy currently holds over $60 billion in Bitcoin, accounting for approximately 99% of its enterprise value. Following this news, Strategy's stock price rose over 6% in after-hours trading, after having accumulated a nearly 60% decline over the past year.

Although MSCI has shelved this controversial plan that could lead to the removal of cryptocurrency-intensive companies from major benchmark indices, this does not mean that the regulatory door is closed. Christopher Harvey, head of equity and portfolio strategy at CIBC Capital Markets, commented:

They are temporarily staying, but MSCI has not closed the door.

Previously, JP Morgan analysts warned that if MSCI proceeded with the removal plan, up to $2.8 billion could flow out of Strategy, and if other index providers followed suit, the outflow could further expand.

Broader Consultation and Definition Challenges

MSCI explained in its statement that distinguishing whether those holding non-operating assets (such as cryptocurrencies) do so for core operations or merely for investment purposes requires further research and consultations with market participants.

Earlier, MSCI proposed banning companies that purchase cryptocurrencies from entering U.S. indices, which sparked strong opposition from several companies, including MicroStrategy.

As one of the earliest and largest cryptocurrency treasury companies, MicroStrategy criticized the plan as "misleading" and "harmful" in a 12-page letter signed by Executive Chairman Michael Saylor last December.

Saylor argued that the 50% threshold "arbitrarily selects digital asset companies for unique adverse treatment" and pointed out that companies with similar exposure to oil, timber, or gold have not faced similar scrutiny. He also stated that the proposed restrictions failed to consider price volatility and core considerations of balance sheet accounting.

Strive, another Bitcoin treasury company co-founded by Vivek Ramaswamy, also raised objections. Its Chairman and CEO, Matt Cole, stated on social media platform X on Tuesday that the decision was a "huge victory," despite the previous "slim chances."

The Transition from Software Company to Bitcoin Holder

Strategy was originally an ordinary software company until 2020, when Saylor shifted the company's cash into Bitcoin, citing inflation eroding cash value.

Initially viewed as a quirky move by most market observers, Strategy quickly became a favorite among speculative investors seeking convenient channels to invest in Bitcoin.

This strategic transformation once caused Strategy's stock price to soar, peaking with an increase of over 3500%, outperforming major stock indices.

However, with the volatility of the cryptocurrency market, most cryptocurrency treasury concept stocks have significantly declined over the past year, with many companies' market values falling below the value of their held digital tokens.

Although MSCI's decision has bought time for Strategy, the debate over the positioning of cryptocurrency treasury companies in traditional financial indices is far from over