Spot Bitcoin ETFs Success Powers Kraken’s Licensing Revenue

4 months ago 45

Kraken’s strategic acquisition of CF Benchmarks in 2019 has proven immensely lucrative in a market increasingly embracing spot Bitcoin ETFs.

As the world’s largest crypto indices provider, CF Benchmarks plays a crucial role as an authorized benchmarks administrator in the Bitcoin ETFs market. This position has enabled Kraken to capitalize on the increasing demand for Bitcoin ETFs, translating into millions in licensing fees.

Kraken Thrives In The Advent of Bitcoin Spot ETFs

Cryptocurrency trading platform Kraken is generating millions in license fees from its subsidiary, CF Benchmarks, acquired in 2019. Although Kraken did not disclose the exact figure, the purchase was for a nine-figure sum. In 2022, pseudonymous researcher Hide Not Slide predicted Kraken’s significant earnings potential through CF Benchmarks.

“Kraken doesn’t have the most crypto market share, but it does have an asset I think will become a top money maker over time — CF Benchmarks. Thi is the index provider for CME’s crypto futures products. If CME crypto futures keep growing Kraken will hold significant market power,” he wrote.

This forecast came true with the approval of 11 spot Bitcoin ETFs on January 10, 2024. CF Benchmarks CEO Sui Chung said the new ETFs were a big step for both the asset class and his company.

“The spot ETFs have been a huge step forward for the asset class and, by extension, a huge milestone for CF Benchmarks as a business, given our role as the leading index provider for the asset class. This has allowed us and our parent, Kraken, to grow our offerings to institutions that are in, and entering the space,” Chung told BeInCrypto.

Chung revealed that inflows in February had topped $1.4 billion, surpassing his one-year revenue target within a month. Major funds issued by BlackRock, Ark Invest, and Franklin Templeton, among others, utilize the BRR index, solidifying CF Benchmarks’ market influence.

“By the time I’d done all the maths it was 1 AM,” Chung said, referring to numbers as of February, where inflows had topped $1.4 billion. “In one month, the Bitcoin ETFs had hit my one-year target, and the Bitcoin ETF boom was just getting started.”

According to DefiLlama, investors have poured over $57 billion into Bitcoin ETFs, enabling CF Benchmarks to earn substantial licensing fees. Although CF Benchmarks does not disclose its earnings, it is expected to continue generating significant amount of money for the foreseeable future.

For example, S&P Dow Jones charges clients about 3 basis points, or 0.03%, on assets based on its S&P 500 indexes. Considering State Street’s ETF manages $541 billion, S&P earns $162 million in fees from this single fund. With Ethereum ETFs expected this summer, CF Benchmarks looks set for strong growth.

CF Benchmarks enforces strict rules to ensure their indices are trustworthy. Exchanges must prevent fraud and follow strict KYC and AML checks to be listed in the index. The BRR gathers pricing data from multiple platforms, including Kraken, Coinbase, and Gemini, but excludes Binance due to regulatory issues. This commitment to transparency and reliability bolsters the strong reputations of both CF Benchmarks and Kraken in the crypto market.

The post Spot Bitcoin ETFs Success Powers Kraken’s Licensing Revenue appeared first on BeInCrypto.

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