Monochrome Asset Management is preparing to launch Australia’s first spot Ethereum exchange-traded fund on Cboe following the asset’s long-anticipated approval in the U.S. market.
Set to begin trading on Monday, Monochrome’s Ethereum ETF (IETH) follows the launch of its Bitcoin ETF (IBTC) in August 2023, which has since garnered $15 million (US$10.1 million).
While that falls well short compared to the billions held in the U.S., the fund is positioning itself as the world’s first to offer in-kind Ethereum subscriptions and redemptions.
It’s a feature that could allow for greater tax efficiencies, CEO Jeff Yew told Decrypt in an exclusive interview.
The dual-access bare trust structure is designed to prevent a capital gains tax event, allowing long-term crypto participants to transfer Ethereum into the corresponding Monochrome ETF without triggering a change of legal and beneficial title.
“A ‘bare trust’ means that your investment in the ETF may be treated as if you directly own the Ethereum,” Yew explained.
In other words, the structure gives investors absolute entitlement to their allocated Ethereum, according to the fund’s public disclosure statement shared with Decrypt.
This means that any actions taken by the trustee are treated as actions of the investor, ensuring that no CGT event is triggered upon redemption or transfer as long as beneficial ownership remains unchanged.
This structure is what Monochrome is hoping sets its offering apart from its U.S. counterparts.
In January, the U.S. Securities and Exchange Commission approved 11 spot Bitcoin ETFs. That was later followed by the approval of nine Ethereum ETFs in May, with billions of dollars flowing into the funds in the months that followed.
While the Australian market is unlikely to ever match those inflows, Monochrome is hoping to build on surging investor interest this year.
“US crypto ETFs can’t be supported in kind, including Bitcoin ETFs, and they are not operated in this timezone,” Yew said.
IETH will track the CME CF Ether-Dollar Reference Rate – Asia Pacific Variant, with a management fee of 0.50%, reduced to 0.21% for accredited advisers. That places it within the range of its U.S. competitors, offering an average of 0.20% and 0.25%.
The ETF will also be available on most Australian brokerage platforms, supporting transfers from crypto platforms, decentralized wallets, and cold wallets.
Crypto financial services firm BitGo and crypto exchange operator Gemini will provide custody services for IETH, while State Street Australia will serve as the fund administrator.
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