Grayscale has launched the first exchange-traded fund offering direct exposure to Zcash, bringing the privacy-focused cryptocurrency to NYSE Arca under the ticker ZCSH.
The First Zcash ETF
The Zcash ETF began trading as a conversion of Grayscale's existing Grayscale Zcash Trust, giving investors access to ZEC through an exchange-traded product without requiring them to directly hold the cryptocurrency. The fund carries a 2.5% annual sponsor fee. A Grayscale spokesperson said revenue collected from the fee will be directed back into the Zcash ecosystem to support network development, marketing and other initiatives.
Zcash, launched in 2016, allows users to make shielded transactions that can conceal transaction information through zero-knowledge proofs. The ETF itself holds ZEC while its shares trade through the traditional securities market. The trust had more than $313.5 million in assets under management as of Monday.
From OTCQX to NYSE Arca
Grayscale's launch follows a regulatory process that began with plans to convert its long-running Zcash Trust into an exchange-traded product. Grayscale filed a Form S-3 registration statement with the U.S. Securities and Exchange Commission in May, later submitting several amendments. Its fifth amended filing set the annual sponsor fee at 2.5% and finalized additional terms for the fund.
The ETF structure changes how investors can enter and exit the product. Authorized participants can create and redeem shares, providing an arbitrage mechanism designed to keep the trading price of ZCSH close to the net asset value of the ZEC held by the fund. Before the conversion, shares of the Zcash Trust traded on the OTCQX market.
Privacy Demand and AI Adoption
Grayscale Head of Index Steve Vanourny said the company expects demand for financial privacy to increase as artificial intelligence makes financial activity easier to analyze and monitor. As AI reshapes how financial activity can be monitored, the company believes demand for genuine financial privacy will only grow.
The comments come after Zcash cleared a separate regulatory issue earlier this year. The SEC closed its Zcash investigation in January without recommending enforcement action against the Zcash Foundation, which had received an SEC subpoena in August 2023 relating to inquiries involving crypto asset offerings.
ZEC Rallies 45% Ahead of Launch
Zcash has gained about 45% over the past several days, with buying accelerating as Grayscale moved through the final stages of the ETF registration process. The advance followed a volatile period for ZEC this year. The cryptocurrency climbed above $600 in May before suffering a sharp decline in June after developers disclosed a critical vulnerability involving Zcash's Orchard shielded pool.
The vulnerability could theoretically have allowed an attacker to create counterfeit ZEC without detection. Developers said they had found no evidence that the bug was exploited, but Zcash's privacy design meant the absence of counterfeit supply could not immediately be independently proven. Developers deployed emergency changes and later activated the Ironwood upgrade on July 28, which replaced Orchard with a new shielded pool and introduced safeguards to prevent undetectable counterfeiting.
Grayscale's Broader ETF Strategy
The Zcash conversion extends a strategy Grayscale has used with several of its earlier cryptocurrency trusts. Its Grayscale Bitcoin Trust was converted into a spot Bitcoin ETF in January 2024 after the asset manager won a federal appeals court case challenging the SEC's rejection of its previous conversion proposal. Grayscale later converted its Ethereum Trust after U.S. regulators cleared spot Ether exchange-traded products. The company has steadily expanded its crypto ETF lineup through trust conversions and new product launches.
