(Bloomberg) — A unit of crypto exchange Kraken is emerging as a key beneficiary of this year’s boom in spot-Bitcoin exchange-traded funds, which debuted in the US in January and rolled out in Hong Kong this week.
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The unit, CF Benchmarks, said it provides reference data for about $24 billion in cryptocurrency ETFs, mostly Bitcoin funds including BlackRock’s US-based $15.9 billion vehicle. The company licenses its benchmarks to the funds in return for fees that typically climb alongside assets under management.
CF Benchmarks said it represents roughly half the crypto benchmarking market and is working with the new Bitcoin ETFs in Hong Kong. Chief Executive Officer Sui Chung sees crypto ETFs reaching South Korea and Israel next.
“South Korea is a market where ETFs have become the wrapper of choice for long-term savings,” he said in an interview. “It is also a market where digital assets have gained a high degree of adoption.”
The company expected $5 billion of assets this year for the US spot-Bitcoin ETFs that use its indexes but the amount is more than four times higher. Chung anticipates as much as $1 billion in funds under management for the Hong Kong products by the end of 2024.
The US ETFs stoked a rally that took Bitcoin to a record of almost $74,000 in March but the token has shed about $14,000 since then as investor demand for the funds fizzled. On Wednesday, the group of nearly a dozen US products suffered its biggest daily net outflow, leaving assets under management at approximately $47 billion.
London-based CF Benchmarks sees revenue expanding in the “mid-double digits” this year, Chung said. Its latest lodged UK accounts show revenue reached £6 million ($7.5 million) in 2022. The firm plans to expand headcount by around a third to more than 40, according to Chung.
Kraken, one of the world’s largest crypto exchanges, acquired CF Benchmarks in 2019 for a nine-figure sum, according to company statements at the time. The business began in 2017 and provides Bitcoin pricing for derivatives on the Chicago Mercantile Exchange, which remains a key revenue stream.
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