On 14 October 2024, Monochrome Asset Management launched Australia’s first spot Ethereum exchange-traded fund (ETF), IETH, on Cboe Australia, marking a significant advancement in the nation’s cryptocurrency investment landscape. The IETH ETF offers unique in-kind Ethereum subscriptions and tax efficiencies via a bare trust structure. The launch follows Monochrome’s successful Bitcoin ETF (IBTC) debut in 2023, which has already garnered $15 million in assets. Trading for IETH is set to begin on 14 October 2024.
This new ETF will allow investors direct exposure to Ethereum (ETH), providing a tax-efficient investment option. This launch builds on the success of Monochrome’s Bitcoin ETF (IBTC), introduced in August 2023, which has amassed $15 million in assets under management.
The IETH ETF has been designed with a unique structure. Unlike U.S.-based ETFs, it features in-kind subscriptions and redemptions, where investors can contribute or redeem Ethereum directly from the fund without triggering a capital gains tax event. This is made possible through its bare trust structure, a legal arrangement that allows investors to maintain both legal and beneficial ownership of the asset.
Monochrome’s CEO, Jeff Yew, explained that the bare trust structure offers a tax advantage for long-term Ethereum holders. In traditional ETFs, investors face potential capital gains tax when transferring assets, but with a bare trust, investors can transfer their ETH into the fund without this shift in ownership. This structure allows the investment to be treated as if the investor still directly owns the Ethereum, making the ETF an attractive option for those looking to manage their tax liabilities more effectively.
Monochrome’s Ethereum ETF stands out, especially compared to the U.S. crypto ETF market, which does not offer in-kind redemptions or subscriptions. In contrast to the growing demand for Bitcoin ETFs in the U.S.A, which saw inflows of US $253.6 million as of 11 October 2024, Ethereum ETFs in the U.S. have seen modest outflows which indicates different market dynamics.
Despite the smaller scale of the Australian market compared to the U.S., Monochrome is optimistic about local demand for cryptocurrency investments. The company aims to attract investors shifting from crypto exchanges to ETFs, and those seeking secure custody solutions. Monochrome hopes to grow its presence by providing easy access to ETH investments through popular brokerage platforms.
Monochrome expects continued interest as the Australian crypto market evolves. The IETH ETF offers competitive fees, set at 0.5%, with a reduced rate of 0.21% for accredited advisors. This is in line with the U.S. market rates for similar products, which typically range between 0.20% and 0.25%. With its tax-efficient structure, competitive fees, and the ability to transfer Ethereum directly, IETH offers a unique investment vehicle for those seeking exposure to Ethereum in Australia’s crypto investment market.
