Monochrome Asset Management launched Australia’s first Ethereum-based exchange-traded fund (ETF) on 15 October 2024. The Monochrome Ethereum ETF (IETH) will begin trading on Cboe Australia under the ticker ‘IETH,’ allowing Australian investors to gain direct exposure to Ethereum through a ‘traditional’ investment fund vehicle. This follows the success of Monochrome’s Bitcoin ETF and reflects the growing global trend of crypto-asset denominated ETFs. In 2024, several crypto-based ETFs, including those for Bitcoin and Ethereum, have been approved in the US, showing the increasing acceptance of these products in mainstream finance.
Likely in response to this growth, the Australian Taxation Office (ATO) has quietly updated its non-binding web guidance to include digital assets like crypto-assets and non-fungible tokens (NFTs) in the list of investments that can be held by ETFs. This update is particularly relevant given the rise of products like the IETH, and it offers some clarity on how crypto-assets fit within the ETF structure.
Tax Implications for Investors
While crypto ETFs offer an accessible way for investors to hold digital currencies like Ether, it is important to understand the tax implications. Any gains made from selling units in the Ethereum ETF may be subject to capital gains tax (CGT). Additionally, income distributions from the ETF could be treated as assessable income and taxed accordingly.
All ETFs in Australia are accompanied by a Product Disclosure Statement (PDS), which may outline the tax implications of investing and dealing with that fund at a high level, but often do not dive deeply into the nuances of the Australian tax laws. Contrastingly, IETH’s PDS has a substantial section on taxation – however it is important to note that this section is not a substitute for personal tax advice. Since the tax treatment can vary depending on your specific circumstances, seeking advice from a tax professional is essential to ensure you understand your obligations.
Looking Ahead
The launch of Australia’s first Ethereum ETF is a significant milestone, following a global trend toward crypto-asset denominated ETFs. As interest in digital assets grows, so too does the regulation and related guidance supporting them. However, with this innovation come important tax considerations, and it is crucial that investors take the time to review the PDS and seek personalised tax advice before investing.
