MSCI's Decision and the Future of Crypto Treasury Firms in Institutional Portfolios

The recent decision by MSCI to retain digital asset treasury companies (DATCOs) in its global equity indices has sent ripples through institutional markets, reshaping the landscape for crypto-related equities. This move, announced in January 2026, underscores the growing institutional acceptance of digital assets while highlighting the delicate balance between innovation and regulatory scrutiny. For investors, the implications are twofold: immediate stabilization of capital flows and a clearer, albeit temporary, path for DATCOs to remain in mainstream portfolios.

Immediate Market Impact: Stabilizing Capital Flows

MSCI's decision to avoid excluding DATCOs-companies holding 50% or more of their assets in cryptocurrencies-has provided a critical lifeline to firms like Strategy Inc., which holds over $60 billion in Bitcoin. According to a Bloomberg report, Strategy's stock surged approximately 6% in after-hours trading following the announcement, as index-tracking funds avoided the estimated $10–15 billion in forced selling that had been anticipated. This outcome reflects the immediate capital flow dynamics tied to index inclusion: when a company is part of a major benchmark, its stock becomes a proxy for broader market exposure, and its exclusion risks triggering liquidity shocks as MSCI's decision indicates.

The decision also aligns with MSCI's stated goal of maintaining market stability. As Reuters analysis notes, the index provider emphasized the need for further research to distinguish between operating companies and investment-like entities, deferring a broader review until February 2026. This pause has allowed DATCOs to retain their status as "operational" entities in the eyes of institutional investors, preserving their inclusion in diversified portfolios.

Historical Precedents: Lessons from MSCI Inclusion

Historical case studies provide valuable context for understanding the broader implications of MSCI's decision. When China's A-shares were included in the MSCI Emerging Markets Index in 2017, connected stocks experienced a 0.77% average cumulative abnormal return in the 10 days post-announcement, while unconnected stocks showed no significant movement. This effect, driven by increased international investor access and reduced liquidity risks, mirrors the potential trajectory for DATCOs. By maintaining DATCOs in its indices, MSCI is effectively signaling that these firms are not mere investment vehicles but operational entities with a legitimate role in global portfolios.

Moreover, inclusion in MSCI benchmarks historically enhances market efficiency. Research indicates that such inclusion reduces stock price synchronicity, a proxy for improved information transparency and investor confidence. For DATCOs, this could mean greater visibility and liquidity, attracting institutional capital that might otherwise avoid the crypto sector due to regulatory or volatility concerns.

Future Outlook: February 2026 Review and Refined Criteria
While the January 2026 decision offers temporary relief, the February 2026 review will determine the long-term trajectory of DATCOs in institutional portfolios. MSCI has signaled its intent to refine eligibility criteria, particularly to address concerns that some DATCOs resemble investment funds, which are excluded from indices according to MSCI's consultation document. This review, as outlined in an official MSCI consultation document, will assess whether DATCOs align with the index's objective of measuring operating companies as detailed in the document.

Key criteria under consideration include the proportion of digital assets to total assets, operational revenue streams, and governance structures. MSCI has confirmed it will not adjust factors like the Number of Shares (NOS) or Foreign Inclusion Factor (FIF) for DATCOs in the immediate term according to MSCI's criteria, but future changes could alter their weightings in benchmarks. For investors, this means maintaining a watchful eye on the February 2026 review, as any tightening of criteria could trigger capital outflows or reclassification risks.

Strategic Implications for Institutional Portfolios
The inclusion of DATCOs in MSCI indices represents a strategic bridge between traditional equities and crypto assets. For institutional investors, these firms offer indirect exposure to Bitcoin and Ethereum without the operational complexities of direct custody or regulatory uncertainty. However, this strategy is not without risks. The deferred review highlights the sector's regulatory gray areas, and any future exclusion could lead to sharp repricing of DATCOs.

Investors should also consider the broader market integration hypothesis. Just as China's A-shares inclusion attracted foreign capital, DATCOs may serve as a gateway for institutional investors seeking crypto exposure while adhering to fiduciary duties as research shows. This dynamic could drive further innovation in crypto-related equities, such as firms with hybrid business models (e.g., blockchain infrastructure providers with token holdings).

Conclusion

MSCI's decision to retain DATCOs in its indices is a pivotal moment for the crypto sector, offering both stability and a glimpse into the future of institutional adoption. While the immediate market reaction has been positive, the February 2026 review will test whether these firms can maintain their status as operational entities. For now, DATCOs remain a strategic asset class, bridging the gap between traditional markets and the digital frontier. Investors must balance the opportunities with the looming regulatory uncertainties, ensuring their portfolios are agile enough to adapt to evolving index criteria.