Monochrome Launches ‘World’s First’ Ethereum ETF With In-Kind Redemption

Despite the poor demand for the spot Ether ETF in the first three months following the US launch, Australia’s Monochrome Asset Management is preparing for a similar launch in the home country. Interestingly, the Monochrome Ethereum ETF comes with a twist that could revive the demand for the investment product.

Monochrome Ethereum ETF Goes Live on Cboe

The Monochrome Ethereum exchange-traded fund (IETH) will start trading on Monday, October 14, on the Australia Cboe exchange. The launch comes within four months of the asset manager introducing its spot Bitcoin ETF to Australian investors in June this year.

Unlike the US-listed Ether ETFs, the Monochrome Ethereum ETF positions itself as the world’s first Ether ETF to offer in-kind Ether subscriptions and redemptions. Monochrome CEO Jeff Yew said that this feature could provide greater tax efficiencies to investors.

These Ethereum ETFs from Monochrome come with a dual-access bare trust structure that seeks to prevent capital gains tax events for long-term crypto holders. This innovative structure allows participants to transfer Ethereum into the ETF without triggering a change in legal or beneficial ownership. Thus, it helps investors avoid immediate tax liabilities. Monochrome has been gearing up for its Ether ETF launch since September.

Furthermore, this new structure from Monochrome will grant investors absolute entitlement to their allocated Ethereum. As a result, any actions from the trustee will be part of the actions for the investor preventing them from capital gains tax during transfer or redemption, as long as the ownership remains the same. Monochrome believes that this would set its Ethereum ETF apart from its US counterparts.

“A ‘bare trust’ means that your investment in the ETF may be treated as if you directly own the Ethereum. US crypto ETFs can’t be supported in kind, including Bitcoin ETFs, and they are not operated in this timezone,” explains Yew in a word with Decrypt.

Competing With US ETFs

The Monochrome Ethereum ETF (IETH) will be accessible through most Australian brokerage platforms and will support transfers from crypto platforms, decentralized wallets, and cold storage wallets.

Additionally, IETH also follows the CME CF Ether-Dollar Reference Rate, and carries a management fee of 0.5%, reduced to 0.21% for accredited advisers. Thus, this fee structure aligns it with U.S. competitors, which offer fees averaging between 0.20% and 0.25%.

Monochrome has roped in top market players like BitGo and Gemini to provide crypto custody for IETH. On the other hand, State Street Australia will be the fund administrator for the ETF.

The Ether ETH inflows have dropped significantly in the US market, but big players like BlackRock continue to remain hopeful. If the overall market demand revives, even Monochrome’s IETH would benefit from it.