Markets
Kraken Makes Millions From Bitcoin ETF Fees
Kraken’s strategic acquisition of CF Benchmarks in 2019 has proven to be immensely profitable in a market increasingly adopting spot Bitcoin ETFs.
As the world’s largest crypto index provider, CF Benchmarks plays a crucial role as an authorized benchmark administrator in the Bitcoin ETF market. This position allowed Kraken to capitalize on the growing demand for Bitcoin ETFs, translating into millions in licensing fees.
Kraken Prosper with 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 amount, 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 biggest share of the crypto market, but it has one asset that I think will become a huge moneymaker over time – CF Benchmarks. This is the index provider for CME crypto futures products. If CME crypto futures continue to grow, Kraken will have significant market power,” he he wrote.
This prediction came true with the approval of 11 spot Bitcoin ETFs on January 10, 2024. CEO of CF Benchmarks Sui Chung said the new ETFs were a big step for both the asset class and his company.
“Spot ETFs were a huge step forward for the asset class and, by extension, a huge milestone for CF Benchmarks as a business, given our role as a leading index provider for the asset class. This has allowed us and our parent company, Kraken, to increase our offerings to institutions that are and are entering the space,” Chung told BeInCrypto.
See more information: What is a Bitcoin ETF? All you need to know
Chung revealed that inflows in February surpassed $1.4 billion, surpassing its year-long revenue target by one month. Major funds issued by BlackRock, Ark Invest and Franklin Templeton, among others, use the BRR index, solidifying the market influence of CF Benchmarks.
“When I finished all the calculations, it was already 1 am,” said Chung, referring to the February figures, where inflows exceeded 1.4 billion dollars. “Within a month, Bitcoin ETFs reached my one-year goal, and the Bitcoin ETF boom was just beginning.”
According to DefiLlama, investors have invested over $57 billion in Bitcoin ETFs, allowing CF Benchmarks to earn substantial licensing fees. Although CF Benchmarks does not disclose its earnings, it is expected to continue generating a significant amount of money in the near future.
See more information: How to Trade a Bitcoin ETF: A Step-by-Step Approach
Total AUM of ETFs. Source DeFiLlama
For example, S&P Dow Jones charges customers around 3 basis points, or 0.03%, on assets based on its S&P 500 indexes. Considering that the State Street ETF manages $541 billion, S&P earns $162 million in fees from this single fund. With Ethereum ETFs expected this summer, CF Benchmarks appears poised for strong growth.
CF Benchmarks applies strict rules to ensure its indexes are reliable. Exchanges must prevent fraud and follow strict KYC and AML checks to be listed on the index. BRR gathers price data from multiple platforms including Kraken, Coinbase and Gemini, but excludes Binance due to regulatory issues. This commitment to transparency and reliability reinforces CF Benchmarks and Kraken’s strong reputation in the crypto market.
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