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

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As a seasoned analyst with extensive experience in the cryptocurrency market, I find the launch of Monochrome’s Ethereum ETF (IETH) an intriguing development. The dual-access bare trust structure and in-kind Ether subscriptions/redemptions are innovative features that could potentially revolutionize the way investors approach Ethereum investments.

Regardless of the weak initial interest in the U.S. launched Ethereum ETF over its first three months, Australia’s Monochrome Asset Management is readying a similar launch within their home country. What makes the Monochrome Ethereum ETF unique is a twist that could rekindle interest in this investment product.

Monochrome Ethereum ETF Goes Live on Cboe

Starting next Monday, October 14th, the Monochrome Ethereum-based exchange-traded fund (IETH) will begin trading on the Australian Cboe exchange. This launch follows approximately four months after the asset manager debuted its Bitcoin spot ETF for Australian investors in June of this year.

As an analyst, I’d rephrase it like this: Unlike US-based Ethereum ETFs that deal with Ethereum through cash proxies, the Monochrome Ethereum ETF distinguishes itself as the world’s pioneering Ether ETF by offering direct Ether subscriptions and redemptions. The CEO of Monochrome, Jeff Yew, emphasizes that this feature could potentially lead to improved tax efficiency for investors.

The Ethereum ETFs offered by Monochrome utilize a dual-access trust structure designed to postpone capital gains taxes for long-term crypto investors. This unique setup lets investors transfer Ethereum into the fund without causing any changes in legal or beneficial ownership, thereby helping them dodge initial tax responsibilities. Monochrome has been preparing for its Ether ETF debut since September.

In addition, the latest structure developed by Monochrome provides investors with full control over their allocated Ethereum, meaning any moves taken by the trustee are considered actions on behalf of the investor. This setup ensures that investors won’t be subject to capital gains tax during transfers or redemptions, as ownership remains consistent. Monochrome is confident that this feature distinguishes its Ethereum ETF from similar products in the US market.

As an analyst, I would put it this way: “A ‘bare trust’ arrangement implies that your investment in the ETF functions as if you personally own the Ethereum. At present, US-based crypto ETFs, such as Bitcoin ETFs, cannot be physically settled and they do not operate within the same timezone.” (This is based on the information provided by Yew in their conversation with Decrypt.)

Competing With US ETFs

Through various Australian brokerage services, you’ll find the Multi-Color Ethereum ETF (IETH), which is designed to be compatible with transfers from cryptocurrency exchanges, decentralized wallets, as well as offline cold storage wallets.

Furthermore, IETH adopts the CME CF Ether-Dollar Reference Rate and charges a management fee that can be reduced to 0.21% for accredited advisers, initially set at 0.5%. This fee structure is comparable to those of U.S. competitors, who typically charge fees ranging from 0.20% to 0.25%.

In this setup, BitGo and Gemini – prominent figures in the crypto market – have been enlisted by Monochrome to ensure secure storage of cryptocurrencies for IETH. Simultaneously, State Street Australia has been chosen to manage the fund administration for the associated ETF.

Inflows of Ether (ETH) into the U.S. market have noticeably decreased, yet major entities such as BlackRock maintain optimism. Should the broader market’s demand pick up, even Monochrome’s IETH could potentially gain from this recovery.

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2024-10-14 07:57