The CEO of CF Benchmarks, a subsidiary of Kraken, predicts that crypto exchange-traded funds (ETFs) in Hong Kong will surpass $1 billion in assets under management (AUM) by the end of 2024. Currently overseeing $24 billion in AUM in the crypto benchmarking market, CF Benchmarks offers reference data for ETFs, primarily focusing on bitcoin products such as BlackRock’s IBIT. Despite a lackluster start in Hong Kong, CF Benchmarks is now collaborating with new ETFs in the region, licensing benchmarks and charging fees proportionate to AUM growth. CEO Sui Chung anticipates the expansion of crypto ETFs to other countries such as South Korea and Israel, citing high adoption rates for digital assets and a preference for ETFs as long-term savings options in South Korea.
Having previously expected $5 billion in assets for US spot-Bitcoin ETFs this year, CF Benchmarks has seen that number far exceeded, reaching over four times the estimate. Chung now predicts that Hong Kong products could accumulate as much as $1 billion in funds under management by 2024. The introduction of US ETFs led to a Bitcoin rally to a record high in March, but investor demand has since waned, resulting in a decline of approximately $14,000 per token. Nearly a dozen US ETFs saw significant daily net outflows on Wednesday, leaving assets under management at around $47 billion. CF Benchmarks believes there is still potential for major revenue growth, with expectations of double-digit growth and plans to expand its workforce.
Acquired by Kraken in 2019 for a nine-figure sum, CF Benchmarks provides Bitcoin pricing for derivatives on the Chicago Mercantile Exchange. This remains a significant revenue stream for the company, which reached revenue of £6 million ($7.5 million) in 2022. Kraken, one of the world’s largest cryptocurrency exchanges, plans to increase CF Benchmarks’ workforce by approximately one-third, surpassing 40 employees to support its expansion. Hong Kong has recently launched its first batch of crypto ETFs, including Bitcoin and Ether products from Harvest Global Investments and a partnership between HashKey Capital and Bosera Asset Management. Bloomberg Intelligence estimates that these funds in Hong Kong could accumulate around $1 billion in the next two years, potentially posing competition for US Bitcoin products.
CF Benchmarks expects significant growth opportunities for crypto ETFs beyond Hong Kong, with potential expansions to other countries such as South Korea and Israel. CEO Sui Chung anticipates that South Korea’s embrace of ETFs as a long-term savings option and high digital asset adoption rates could make it a prime market for crypto ETFs. The company licenses benchmarks to funds, charges fees based on AUM growth, and is actively collaborating with new ETFs in Hong Kong. Despite initial lackluster trading volumes, CF Benchmarks is optimistic about the future prospects of the crypto ETF market and believes that the industry has the potential to grow substantially in the coming years.
