Truth Cartographer

Tag: index governance

Bitcoin Is Yet to Pass the ERISA Line
JP Morgan Is Not Blocking Bitcoin. It Is Protecting a Covenant.

JP Morgan signals support for MSCI’s proposal to exclude “crypto treasury firms” from equity indexes. The reaction from Bitcoin advocates is swift. They accuse JP Morgan of gatekeeping, suppression, and anti-innovation bias. But the decision is not about ideology. It is about fiduciary duty. Index providers serve as conduits into retirement portfolios governed by ERISA. Their role is not to democratize risk, but to eliminate any exposure that cannot be defended under oath.

Indexes Are Not Market Catalogs — They Are Fiduciary Pipelines

Trillions in passive capital track equity indexes such as MSCI Global Standard, ACWI, and US Large/Mid Cap. Much of this capital comprises retirement savings. Inclusion implies suitability for investors. Their assets are bound not by risk appetite but by a legal covenant: the Employee Retirement Income Security Act of 1974 (ERISA).

Under ERISA, a portfolio is not a financial product.
It is a liability-bound promise.

ERISA Sets the Boundary, Not Market Innovation

Three statutory provisions form the line that crypto treasury firms cannot yet cross:
- Section 404(a)(1) — Prudence Standard
  Fiduciaries must act with “care, skill, prudence, and diligence under the circumstances then prevailing.”
  Bitcoin treasury exposure introduces valuation opacity. It causes sentiment-driven volatility and unpredictable drawdowns. No prudent expert can justify this in a retirement portfolio.
- Section 406 — Prohibited Transactions
  Fiduciaries must not expose plan assets to arrangements involving self-dealing or conflict of interest.
  Crypto treasury firms often hold disproportionate insider positions or balance-sheet exposures that materially benefit executives and early holders. This creates a structural conflict that compliance cannot neutralize.
- Section 409 — Personal Liability
  Fiduciaries are personally liable for losses resulting from imprudent decisions.
  Without standardized custody controls, auditable valuation, and predictable liquidity, no fiduciary can defend crypto-linked equity exposure in litigation.
Under ERISA, a product is not disqualified because it might fail, but because its risk cannot be proven prudent.

Index Is a Risk Boundary, Not a Policy Position

Funding ratios, beneficiary security, and trustee liability—not innovation—govern index eligibility. By supporting MSCI’s exclusion, JP Morgan is not opposing the asset class. It is ensuring that fiduciaries do not receive products that could later expose them to legal action.

Bitcoin advocates mistake exclusion for attack.
Institutional finance reads it as compliance.

This Is Not Market Hostility. It Is Process Integrity.

JP Morgan invests in blockchain infrastructure, tokenization, and settlement rails. It has no interest in prohibiting innovation.

Conclusion

Index providers are not arbiters of technological relevance. They are guardians of fiduciary admissibility.
Until crypto treasury firms can satisfy prudence (404), conflict hygiene (406), and liability defensibility (409), exclusion is not discrimination.
It is risk containment.

Further reading:
November 24, 2025

Tag: index governance

Bitcoin Is Yet to Pass the ERISA Line