The Block spoke with Sui Chung, CEO of Kraken subsidiary CF Benchmarks, which provides the indexes used by BlackRock, Valkyrie, and Wisdom Tree in their Bitcoin spot ETF applications. Chung, who has been closely involved in the Bitcoin ETF application process over the years, talked about how BlackRock's recent application is different and the potential market size of these funds.

Bitcoin Reference Index - BRRNY

BRRNY is the net asset value (NAV) reference indicator of BlackRock Bitcoin Spot ETF, which is the basis for measuring the difference between the ETF's market value and net asset value (NAV).

What people criticize about Grayscale GBTC is that the difference between its market value and net asset value is too large, which prevents investors from enjoying the real appreciation of Bitcoin spot.

BRRNY is a daily Bitcoin benchmark index price that aggregates trading data from multiple Bitcoin USD markets operated by major cryptocurrency exchanges that meet the CMECF constituent exchange standards, in sync with the closing price of traditional US financial markets at 4 pm New York time. It is regulated by the UK FCA in accordance with the EU BMR.

According to SuiChung, 7 of the 13 ETF applications that he believes have been approved use this benchmark index. In addition to Kraken, the index providers include Bitstamp, Coinbase, itBit, Gemini and LMAX Digital.

Supervision sharing agreement is the highlight of this application

Speaking of the differences in BlackRock's application documents, Sui Chung believes that what is really important is the 19-b4 process. NASDAQ, as an exchange, must prove why the listing of the ETF will not undermine the exchange's provisions of the Securities Exchange Act.

Nasdaq stated in its application that it will sign a Bitcoin surveillance-sharing agreement with spot trading platform operators. The surveillance-sharing agreement allows partners to share information about market trading activities, clearing activities, and customer identities, thereby reducing the possibility of market manipulation. This agreement can help exchanges detect and prevent potential fraud and manipulation, and improve market transparency and efficiency.

The impact of Bitcoin spot ETF on the market

When asked about the impact of Bitcoin spot ETF approval on the market, Sui Chung believes that this is a multi-billion dollar issue. If ETFs are considered as a type of investment tool, about 60% of the investing public in the United States hold at least one ETF, which is a huge market. And if investors who are accustomed to investing in ETFs buy Bitcoin ETFs through long-term savings plans such as 401(k), there will be tax benefits in the 401(k) package.

According to statistics, 20% of Americans already own cryptocurrencies. However, if you buy and sell Bitcoin through exchanges such as Coinbase, you will be subject to capital gains tax. However, if you buy and sell Bitcoin ETFs through 401(k), you will enjoy the benefits of deferred taxation, which may also be favored by some cryptocurrency holders.

Note: The 401(k) retirement benefit plan is a deferred tax retirement account plan established in the United States in 1981. The U.S. government has clearly stated the relevant regulations in Section 401(k) of the Internal Revenue Code, so it is referred to as the 401(k) plan.

Although BlackRock's application will not be finalized until early August, the Purpose Bitcoin ETF listed on the Toronto Stock Exchange in Canada has already held 25,418 bitcoins, a record high since last August, and the fund management scale has reached US$1.03 billion. The recent crypto market and blockchain concept stocks have also shown good celebrations. As for how long this wave of institutional entry can last and whether it will really usher in a new market, investors still have to be cautious in risk management!