CF Benchmark’s CEO says institutions are more interested than ever in crypto

CF Benchmarks has fielded more calls from traditional financial institutions during the crypto winter than the crypto index provider received during the bull market.

About fifteen months ago, much of CF’s engagement with Wall Street stemmed from asset managers looking to license its bitcoin pricing product to upcoming hopeful spot bitcoin ETFs, CEO Sui Chung told Blockworks.

A subsidiary of crypto exchange Kraken, CF is perhaps best known for its benchmark rates for bitcoin and ether, employed by derivatives market CME Group to settle its futures contracts for digital assets.

“Now it’s much more, ‘How do you think about this world?'” Chung said. “How do you categorize the work you do and what do you intend to do going forward? They’ve sort of done their homework.”

CF continues to focus on decentralized finance, DAOs (decentralized autonomous organizations) and Ethereum smart contracts as the merger approaches, Chung said — three key areas for institutions of late.

The CEO spoke with Blockworks about how the prolonged crypto bear market has caused deep-pocketed institutions to change course — or not — and the company’s path forward from a macro perspective.

Blockwork: What kind of conversations has the company had with institutional investors recently?

Chung: Even though it’s winter, we’re getting more and more calls from traditional financial institutions who are either considering launching a product in space or have actually decided they’re going to do something – and obviously want to talk about licensing our indices and understand the methodologies. .

Increasingly, we find that the institutions that talk to us have a framework of how they think about it, and they want to know if we see eye to eye on it. So there is a change.

With one particular firm – a very old asset manager with a trillion dollar plus in AUM – we had some discussions about dapps [decentralized applications] which I must admit was on the periphery of my vision.

Blockwork: What did you think of BlackRock’s recent partnership with Coinbase?

Chung: It’s obviously huge. Connecting these two pieces of plumbing for $40 trillion worth of assets is not trivial. However, I will temper that by saying that it is still just plumbing. Are they [portfolio managers] and IT managers rushing to assign? No, that is not the case. But a very significant pain point has been removed.

Really, what the BlackRock and Coinbase connection means is that there’s a bunch of asset managers out there that now no longer have to do all that vendor onboarding, hooking it up, which is not trivial. So I would say the bigger potential impact is that it’s not as much as more investors will allocate. It is that more asset managers can spin up products faster.

Blockwork: What about BlackRock’s announced launch of a private bitcoin trust?

Chung: Obviously, BlackRock’s private bitcoin trust is a watershed.

By definition, BlackRock talks to more institutions than anyone else, because it is the largest asset manager. So, BlackRock has clearly talked to enough institutions that showed very genuine interest in launching this.

Blockwork: Average daily open interest across CME Group’s crypto products hit a record last quarter. What do you think about these numbers?

Chung: I think they will continue to grow, because now you have all the big banks and [futures commission merchants]…brokes these futures and clears these futures – so there is a lot of capacity. It seems like every time capacity is added, it fills up.

You also have the ETFs which are a big anchor now for open interest … so the catch is: I can’t see one right now.

The one thing that’s kind of analogous to … is when commodities came into the financial mainstream … You get to 2005, you need commodity exposure … and suddenly everybody had to walk around learning what lean pork was, soybeans and Kansas wheat .

It’s kind of like that…if you apply it, and then look at the growth in trading volume and open interest in all these commodity contracts since they were funded…BITO and USO are actually quite similar in the way they hit the market and went to 1 billion dollars in a day.

Blockwork: How long before we see a spot bitcoin ETF in the US?

Chung: The demand from investors for a spot bitcoin ETF is obviously there. It’s no secret. Whether the SEC will not reject one … remains to be seen.

As the guy who has been rejected the most times through the spot bitcoin ETF process, which is the index provider to, I think eight rejections, it seems like a lot has to happen before this SEC will allow it.

Blockwork: How about an ether futures ETF?

Chung: The [ether] Futures on the CME continue to be increasingly liquid and there is increasing trading volume. As long as an issuer is confident enough that they can convince the SEC that they can create and redeem unlimited amounts… and that the ether futures market is liquid enough to accommodate it, it’s a matter of when the market meets that test, and it is . .

Blockwork: What are you keeping an eye on as crypto winter persists?

Chung: People use the term crypto industry… but we both know there is no such thing. It’s just a bunch of companies doing what they’re trying to do. Some of them are doing very well and have been doing it for a long time and are very large and have processes, have controls — I’m talking about Coinbases and Krakens.

And then you have other firms that don’t work like that, some of which have already exploded spectacularly – the Celsiuses of this world. I don’t think it’s over for some of the less well run and less carefully managed firms to stop withdrawals and become illiquid.

Obviously, that’s going to hurt investors. That will probably lead to more volatility, and that’s obviously not what we want to see, but it’s kind of necessary.

This interview has been edited for brevity and clarity.

Get today’s best crypto news and insights delivered to your inbox every night. Subscribe to Blockworks’ free newsletter now.