Kraken makes millions with Bitcoin ETF fees

Kraken's acquisition of CF Benchmarks in 2019 proved extremely valuable in a market increasingly embracing Bitcoin ETFs.

As the world's largest provider of crypto indices, CF Benchmarks plays an important role in the Bitcoin ETFs market as an authorized administrator of benchmarks. This position allowed Kraken to capitalize on the growing demand for Bitcoin ETFs, translating licensing fees into millions.

Kraken thrives on the arrival of Bitcoin Spot ETFs

Cryptocurrency trading platform Kraken is making millions in license fees from CF Benchmarks in 2019. The purchase was for a nine-figure sum, though Kraken did not disclose the exact figure. In the year By 2022, an unnamed researcher Hide Slide Not Slide predicted Kraken's highest revenue potential at CF Benchmarks.

“Kraken doesn't have a lot of crypto market share, but it has assets that I think will be huge money makers over time – CF Benchmarks. Thi is the index provider for CME's crypto futures products. If CME crypto futures continue their growth, Kraken will hold significant market power,” he wrote.

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

“Spot ETFs was a big step forward for the asset class and, in addition, a big milestone for CF Benchmarks as a business and as the leading index provider for the asset class. This allowed us and our parent Kraken to expand our entry into the institutional and space,” Chung told BeinCrypto.

Read more: What is a Bitcoin ETF? Everything you need to know

Chung said revenue rose $1.4 billion in February, surpassing its one-year revenue forecast in one month. Major funds offered by BlackRock, Arch Invest and Franklin Templeton use the BRR index, which reinforces the market impact of CF benchmarks.

“It was 1 a.m. when I was doing all the math,” Chung said, referring to February's numbers, which saw revenue climb to $1.4 billion. “Within a month, Bitcoin ETFs had hit my one-year target, and the Bitcoin ETF boom was just beginning.”

According to Defillama, investors have poured more than $57 billion into Bitcoin ETFs, allowing CF Benchmarks to earn high licensing fees. Although CF Benchmarks does not disclose earnings, it is expected to continue to generate significant amounts of cash for the foreseeable future.

Read more: How to trade Bitcoin ETF: A step-by-step approach

For example, S&P Dow Jones charges clients about 3 basis points, or 0.03%, based on the S&P 500 indices. Considering that State Street's ETF manages $541 billion, S&P will get $162 million in fees from this single fund. With Ethereum ETFs expected this summer, CF Benchmarks looks poised for strong growth.

CF Benchmarks enforces strict rules to ensure their benchmarks are reliable. Exchanges must prevent fraud and follow strict KYC and AML checks outlined in the index. BRR collects pricing data from multiple platforms, including Kraken, Coinbase and Gemini, but excludes Binance due to regulatory issues. This commitment to transparency and reliability reinforces the strong reputation of both CF Benchmarks and Kraken in the crypto market.