Major Institutional Adoption Boost As Australia’s First Spot Ether ETF Set To Launch On Tuesday

Australia-based asset management firm Monochrome is set to launch the nation’s first spot Ethereum exchange-traded fund on the global listing exchange Cboe following Ether’s much-awaited arrival on American exchanges.

Monochrome’s spot Ethereum ETF will be the first in Australia to hold physical ETH in its ETF, similar to the U.S.-based products. It follows the August rollout of the company’s flagship product, the Monochrome Bitcoin ETF (IBTC), also recognized as Australia’s first ETF that holds BTC directly.

Australia Allows In-Kind Creations For Monochrome’s Spot Ether ETF

Australia is set to join the United States in offering investors an ETF that invests in and directly holds the world’s second-largest crypto by market cap, Ethereum. 

The Monochrome Ethereum ETF (IETH) will begin trading on the Cboe Australia exchange on Tuesday, Oct. 15 at 10:00 local time. IETH positions itself as the world’s first Ethereum exchange-traded fund to allow in-kind creations and redemptions for spot ETH ETFs, an important distinction from the cash-only redemptions for the U.S. ETH spot-based products. This could potentially pave the way for a massive investor base across Australia to enter the crypto market.

With the in-kind redemptions feature for ETFs, the underlying asset doesn’t actually have to be sold. Investors and issuers, therefore, prefer it as it allows for greater tax efficiencies, Monochrome CEO Jeff Yew noted.

Cash–only redemptions, on the other hand, mean ETF shares can be exchanged only for cash, which typically means costlier tax and trading considerations.

Monochrome’s Ether ETF also comes with a dual-access bare trust structure that aims to prevent a capital gains tax event, letting long-term crypto participants move Ether into the corresponding Monochrome ETF without triggering a change of legal and beneficial ownership. “A ‘bare trust’ means that your investment in the ETF may be treated as if you directly own the Ethereum,” Yew elaborated.

Moreover, Monochrome will give investors absolute entitlement to their allocated Ether. As such, any actions from the trustee are treated as actions of the investors, shielding them from a capital gains event during transfer or redemption as long as the beneficial ownership remains the same.

Growing Investor Interest

The Monochrome Ethereum ETF will be accessible through major brokerage platforms in Australia. It will also allow transfers from cryptocurrency exchanges, decentralized wallets, and cold storage wallets.

In addition, IETH will track the CME CF Ether-Dollar Reference Rate, with a management fee of 0.5%, slashed to 0.21% for accredited advisers. This fee structure aligns it with US competitors, offering an average of 0.20% and 0.25%.

Although the Australian market is unlikely to ever match the gargantuan inflows witnessed by the U.S.-listed crypto ETFs, Monochrome aims to capitalize on the skyrocketing investor interest this year.

Several other nations have greenlighted listings of spot crypto ETFs after the debut of the investment vehicles in the U.S. in January, though all have been considerably smaller in scale than their U.S. peers. According to reports last week, South Korea’s Financial Services Commission is also mulling allowing spot crypto exchange-traded funds in the country.