Monochrome hopes its ETF will attract investors who are focused on capital gains, thereby distinguishing it from American products and domestic competitors.
Following Ethereum's long-awaited approval in the U.S. market, Monochrome Asset Management is preparing to launch Australia's first Ethereum spot exchange-traded fund on Cboe.
Monochrome's Ethereum ETF (IETH) will begin trading on Monday (10 a.m. Tuesday Australian Eastern Daylight Time), after the company also launched a Bitcoin ETF (IBTC) in August 2023, which has raised $15 million ($10.1 million) in funds.
Although this figure is far from enough compared to the billions of dollars held in the United States, the fund positions itself as the world's first fund to offer physical Ethereum subscriptions and redemptions.
Chief Executive Officer Jeff Yew said in an exclusive interview with Decrypt that this feature can improve tax efficiency.
The dual access bare trust structure is designed to prevent capital gains tax events, allowing long-term cryptocurrency participants to transfer Ethereum to the corresponding Monochrome ETF without triggering changes in legal and beneficial ownership.
"'Bare trust' means that your investment in the ETF may be considered as you directly owning Ethereum," Yew explained.
In other words, according to the public disclosure statement shared with Decrypt by the fund, this structure gives investors absolute rights to their allocated Ethereum.
This means that any actions taken by the trustee are considered as the investor's actions, ensuring that as long as the actual ownership remains unchanged, there will be no CGT event triggered during redemption or transfer.
Monochrome hopes to differentiate its products from American peers through this structure.In January of this year, the U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs. Subsequently, in May, another 9 Ethereum ETFs were approved, and in the following months, billions of dollars flowed into these funds.
Although the Australian market is unlikely to reach the level of these inflows, Monochrome hopes to further stimulate investor interest this year.
Yew said: "U.S. cryptocurrency ETFs cannot be physically supported, including Bitcoin ETFs, and they do not operate in this time zone."
IETH will track the CME CF Ether-Dollar Reference Rate - Asia-Pacific version, with a management fee of 0.50%, which drops to 0.21% for accredited advisors. This places it within the range of its U.S. competitors, who on average offer rates of 0.20% and 0.25%.
The ETF will also be listed on most Australian brokerage platforms, supporting transfers from cryptocurrency platforms, decentralized wallets, and cold wallets.
Crypto financial services company BitGo and cryptocurrency exchange operator Gemini will provide custody services for IETH, while State Street Australia will act as the fund manager.