Monochrome Asset Management, registered in Australia, is to invest in the nation's first spot Ethereum exchange-traded fund (ETF), called IETH. The ETF will go live at the Australian Cboe exchange beginning October 14, 2024.
This launch represents a significant development in the Australian financial landscape, especially following the introduction of the nation's first Bitcoin ETF, IBTC, in June of this year.
The new IETH emerges when another similar product was launched in the USA, although this has not attracted significant attention. Monochrome's recent event in Sydney featured participation from various stakeholders, including the asset manager's partners and service providers.
Monochrome's move aims to enhance the options available for regulated cryptocurrency investments within Australia.
Monochrome's IETH ETF has a unique feature that sets it apart from other ETFs: it operates as a dual-access fund, allowing cash and in-kind applications and redemptions. This innovative structure has been designed to offer greater tax efficiencies for Australian investors, enabling them to engage in Ethereum investments in a regulated environment.
According to Monochrome CEO Jeff Yew, the dual-access model includes a 'bare trust' component, allowing ETF investments to be treated as direct ownership of Ethereum.
This means investors are entitled to their allocated Ethereum without the immediate capital gains tax implications typically associated with such investments. By facilitating in-kind transfers, the fund prevents investors from triggering capital gains tax events during the transfer or redemption.
This structure may appeal to long-term investors seeking a more efficient way to manage their crypto holdings. It allows for greater flexibility in managing investments while maintaining compliance with Australian financial regulations. The design aims to provide a competitive edge over US counterparts, which generally do not offer similar in-kind redemption options.
Monochrome's IETH ETF was launched when interest waned slightly in the US, where consumers were excited to spot Ether ETFs. Monochrome aims to create a different narrative in the Australian market, especially since the ETF is available on many brokerages. Users will also be allowed to import assets from exchanges and wallets for increased usefulness to investors.
Monochrome has partnered with established firms such as BitGo and Gemini for crypto custody solutions, ensuring the security and management of the underlying assets. State Street Australia will serve as the fund administrator for the ETF, further reinforcing IETH's operational integrity.
The management fee is set at 0.5%, with a reduced fee of 0.21% for accredited advisers, aligning it competitively with US ETFs that typically feature management fees from 0.20% to 0.25%.
Management believes that setting a distinctly different form of the product and containing it by complying with regulatory standards may appeal to different investors who seek exposure to Ethereum contracts within a regulated structure. Prospects for altcoins remain uncertain, but they could grow as the total market for cryptocurrencies expands, with Monochrome preparing for that possible expansion.