Monochrome, an Australian asset management firm, is gearing up to introduce the country’s first Ethereum spot exchange-traded fund (ETF) on the Chicago Board Options Exchange (CBOE).
The fund, set to trade under the ticker IETH, is expected to go live on Monday, October 14, 2024. Monochrome’s innovative ETF offering aims to stand out by allowing in-kind Ethereum subscriptions and redemptions, a feature the firm believes could offer tax benefits and enhanced investor flexibility.
A unique approach to Ethereum investment
According to Monochrome’s CEO, Jeff Yew, the in-kind subscription and redemption process is one of the key differentiators of the IETH ETF. This mechanism enables investors to transfer Ethereum directly into the ETF without changing the legal or beneficial ownership of the asset. The fund will operate under a dual-access bare trust structure, which Yew suggests could offer tax efficiencies by potentially protecting investors from capital gains taxes.
Under this structure, investors retain ownership of Ethereum within the ETF, and any actions taken by the trustee are considered the actions of the investor, ensuring tax obligations are minimized as long as ownership remains unchanged. Yew noted that this setup provides an edge over US-based Ethereum ETFs, which do not offer similar in-kind support. He believes the unique structure and the fund’s ability to operate in the Australian time zone will make IETH more attractive to local investors than international alternatives.
IETH to follow CME CF ether-dollar reference rate
The IETH ETF will track the CME CF Ether-Dollar Reference Rate Asia Pacific Variant, exposing investors to Ethereum’s price in Australian dollars. The fund has set its management fees at 0.50% for non-accredited investors and 0.21% for accredited advisers, making it competitive with similar offerings in the US market, where fees range between 0.20% and 0.25%.
For custody services, Monochrome has enlisted crypto financial firm BitGo and crypto exchange Gemini to keep Ethereum assets within the fund safely. State Street Australia will serve as the fund’s administrator, ensuring compliance with regulatory requirements and smooth day-to-day operations.
US Spot Ethereum ETFs face slow demand
Despite Monochrome’s optimistic outlook for its new Ethereum spot ETF, the broader market for such products has experienced slow demand in the United States. As of Friday, October 11, 2024, US spot Ethereum ETFs saw net outflows of $97,110. BlackRock’s ETHA fund, listed on the NASDAQ, leads the market with net assets worth $1.02 billion, but the overall performance of US-based Ethereum ETFs remains underwhelming.
While Yew acknowledges that Australian-listed ETFs are unlikely to outperform their US counterparts in volume, he emphasizes that the local time zone and IETH’s in-kind feature could offer significant advantages for Australian investors. He also highlighted that US-based crypto ETFs, including Bitcoin ETFs, do not currently support in-kind transactions, further distinguishing Monochrome’s offering.
Monochrome launched a Bitcoin ETF in August 2023, attracting over $10 million in inflows. In contrast, US-based Bitcoin ETFs have collectively garnered $18.81 billion in net inflows, with BlackRock’s Bitcoin fund holding net assets valued at $23.30 billion as of October 11, 2024.