NZ’s ‘Cold Wallet’ Status Leads To Launch Of Industry First Investment Fund

NZ’s growing global reputation as a safe haven for international investors has seen the launch of an industry-first investment fund, aiming to attract over $100 million in its first year.

The Quay Cove Ethereum Growth Fund (QCEG), which cost over $2 million and took two years to bring to market, is the country’s first crypto fund to be structured as a wholesale PIE (Portfolio Investment Entity) with a New Zealand-based custodian.

Its creation follows the establishment of the country’s largest Ethereum staking operation, by Everlasting. The fund’s founders say its launch will support New Zealand becoming recognised as a global digital asset hub.

Ethereum is a public blockchain and smart contract platform that keeps track of all transactions and allows people to interact with smart contracts - onchain apps that automatically carry out terms without needing a middleman.

These smart contract-powered apps are used in a wide range of industries including finance and gaming as well as managing supply chains transparently and securely.

Among cryptocurrencies, Ethereum is second only to Bitcoin in market capitalisation and has grown 70% since the start of the year to reach US$490 billion. The move in 2022 towards a less energy-intensive form of blockchain validation means Ethereum now uses less than one per cent of the energy resources required to create Bitcoin.[1][2]

Using a process called staking, individuals can be rewarded for helping secure the Ethereum network and validate transactions.

Under the QCEG PIE structure, investors pay a maximum of 28% tax on the income generated in the fund.

Luke Ryan (Nga Puhi), Everlasting Group CEO and founder of Quay Cove, says the development of the Quay Cove fund evolved from a year-long analysis of tax regulations that found, unlike exchange-traded funds in other countries, they could provide investors access to Ethereum along with staking returns.

He says with global political uncertainty there is potential for New Zealand to become an international digital asset hub.

“The idea behind the fund began with Everlasting, a company focused on legacy planning and estate management. Through our work with high-net-worth clients, we noticed a growing interest in digital assets, particularly Ethereum - which led to the development of an accessible and regulated wholesale investment giving investors access to digital assets.

“With the foundation of knowledge we had from working with the IRD on a previous ruling along with specialist consultants, we created an industry-first Ethereum fund with staking that is vertically integrated and entirely based within New Zealand.

“What we are hearing from the global market is that NZ is being seen as the world’s ‘cold wallet’ now - which in other words means digital assets held here are effectively insulated from the turmoil in the rest of the world by our regulatory stability and High Court rulings.

“While our geographic isolation has historically been a challenge for product exporters, in the world of financial products there is growing awareness among investors in Singapore and the greater Asia region that investing in New Zealand is not a bad idea.

“This poses an interesting narrative because we're not telling everyone that we want everything, but we're saying this is an option that you can consider for investment in digital assets and you could be a high net worth individual or you could be an asset manager that just wants to put a small allocation here,” he says.

Ryan says while QCEG is currently open to wholesale investors only, they are looking to create a retail product as demand grows.

[1] Ethereum Market Cap Daily Insights: Ethereum Statistics | YCharts. (n.d.). YCharts. https://ycharts.com/indicators/ethereum_market_cap

[2] https://www.statista.com/statistics/1265897/worldwide-ethereum-energy-consumption/

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