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Crypto

Kraken's CF Benchmarks Powers $24B in Bitcoin ETFs, Eyes Global Growth

Kraken's CF Benchmarks underpins $24 billion in Bitcoin ETFs, eyeing expansion in South Korea and Israel.

By Max Weldon

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5/3, 05:24 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • Kraken's CF Benchmarks emerges as a major player in the Bitcoin ETF market, providing data for $24 billion in funds, including BlackRock’s $15.9 billion ETF.
  • The unit anticipates significant growth, with assets in US Bitcoin ETFs using its indexes exceeding expectations fourfold and projecting $1 billion for Hong Kong ETFs by end of 2024.
  • Despite a recent drop in Bitcoin value and the largest daily net outflow from US products, CF Benchmarks expects revenue to grow in "mid-double digits" this year.

Kraken's CF Benchmarks Leads in Crypto ETFs

Kraken's subsidiary, CF Benchmarks, has become a pivotal player in the burgeoning market of spot-Bitcoin exchange-traded funds (ETFs), particularly with the recent launches in the US and Hong Kong. The company, which specializes in providing reference data for cryptocurrency ETFs, has seen its benchmarks underpin approximately $24 billion in assets, predominantly through Bitcoin funds. This includes the significant $15.9 billion ETF managed by BlackRock in the United States. CF Benchmarks earns its revenue through licensing fees from these funds, which increase as the assets under management grow. The firm claims to hold about half of the market share in crypto benchmarking and is actively collaborating with the newly introduced Bitcoin ETFs in Hong Kong.

Global Expansion and Market Growth

CF Benchmarks CEO Sui Chung has identified South Korea and Israel as the next potential markets for crypto ETF expansion, citing the high adoption of digital assets and the preference for ETFs in long-term savings plans in these regions. Despite initial expectations of managing $5 billion in US spot-Bitcoin ETF assets in 2023, the actual figures have quadrupled, with projections reaching up to $1 billion for the Hong Kong products by the end of 2024. However, the enthusiasm has seen a recent dip, with the US ETFs experiencing their largest daily net outflow, reducing the total assets under management to around $47 billion from a peak of over $60 billion.

Financial Performance and Strategic Moves

London-based CF Benchmarks, acquired by Kraken in 2019, anticipates a mid-double-digit revenue growth this year, building on the £6 million ($7.5 million) revenue reported in 2022. The company plans to increase its workforce by a third to support its expansion efforts. CF Benchmarks also plays a crucial role in the derivatives market, providing Bitcoin pricing for the Chicago Mercantile Exchange, which remains a significant source of income.

Institutional Interest and Market Dynamics

Despite recent outflows, the interest in Bitcoin ETFs remains robust, with BlackRock's IBIT ETF drawing $17.2 billion in assets. This interest is partly driven by the anticipation of new institutional investors, such as sovereign wealth funds and pension funds, entering the market. BlackRock has been actively engaging with these institutions, educating them on the potential benefits of digital assets and their integration into investment strategies. The competition between IBIT and Grayscale's GBTC, along with the inflow from various international and futures-based products, highlights the diverse investor base attracted to Bitcoin ETFs.

Street Views

  • Sui Chung, CEO of CF Benchmarks (Bullish on crypto ETFs):

    "South Korea is a market where ETFs have become the wrapper of choice for long-term savings. It is also a market where digital assets have gained a high degree of adoption."