Grayscale Investments filed an S-3 registration statement with the Securities and Exchange Commission on Wednesday to convert its Zcash Trust into a spot exchange-traded fund, marking the first attempt to bring a regulated privacy-focused cryptocurrenc investment vehicle to U.S. markets.
The filing arrives barely one week after Grayscale launched its Dogecoin ETF on NYSE Arca and follows successful conversions of Bitcoin and Ethereum trusts into spot ETFs throughout 2024.
The Zcash Trust currently holds approximately 394,400 ZEC valued at roughly $197 million, making it one of the largest institutional holders of the privacy-preserving cryptocurrency.
Chairman Barry Silbert signaled confidence in the conversion on X, noting that Grayscale launched the Zcash Trust in 2017 "well before privacy emerged as an investment theme."
The timing coincides with surging institutional interest in privacy-focused digital assets, particularly following Nasdaq-listed Reliance Global Group's recent announcement that it consolidated its entire digital asset treasury into Zcash.
What Happened
The proposed ETF would hold real Zcash and track the CoinDesk Zcash Price Index, with shares issued and redeemed in baskets of 10,000 through authorized participants using cash orders. The filing also supports a 19b-4 rule change petition that would allow the fund to list and trade on NYSE Arca under the ticker ZCSH once regulators approve.
Grayscale qualifies to use the S-3 form due to its size, reporting history, and successful 2024 conversions of Bitcoin and Ethereum trusts into spot ETFs. This streamlined registration process allows established issuers to move more quickly through the SEC approval pipeline.
According to the filing, as of September 30, the trust reported a Principal Market Net Asset Value of approximately $29.7 million and a non-GAAP Net Asset Value of about $29.8 million. The trust held around 2.4 percent of all ZEC in circulation at that time.
Coinbase Custody will serve as custodian, Coinbase as prime broker, and the Bank of New York Mellon as transfer agent and administrator. The fund would charge a 2.5 percent annual sponsor fee, consistent with Grayscale's existing trust expense ratio.
Craig Salm, Grayscale's Chief Legal Officer, emphasized that Zcash's privacy-focused features, including shielded transactions and zk-SNARKs, serve a critical role in privacy-preservation on cryptocurrency networks. "As a result, we believe ZEC represents an important component of a well-balanced digital asset portfolio," he stated.
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Why It Matters
The filing follows a dramatic surge in Zcash adoption and price appreciation. ZEC climbed more than 1,200 percent over 90 days before pulling back from its $730 peak to around $500 currently, according to price data.
Reliance Global Group's November 25 announcement that it consolidated its entire digital asset treasury into Zcash brought heightened attention to the privacy coin. The Nasdaq-listed insurance technology firm fully exited previous holdings in Bitcoin, Ethereum, Cardano and XRP to focus exclusively on ZEC following a comprehensive strategic review.
Reliance cited Zcash's Bitcoin-based UTXO architecture enhanced with optional privacy and selective disclosure capabilities as aligning with institutional and compliance needs. The company deployed additional cash into its ZEC position on November 26, reflecting what it called "high-conviction belief in ZEC's long-term potential."
The conversion to a spot ETF would provide broader regulated investor access compared to the current closed-end trust structure, which trades on OTCQX and has historically experienced substantial premiums and discounts to net asset value per share. An arbitrage mechanism through creation and redemption baskets aims to keep NYSE Arca trading closer to underlying value.
SEC approval timelines for cryptocurrency ETFs vary widely. Previous Grayscale conversions, including the Dogecoin Trust, took approximately three months, while other multi-cryptocurrency ETFs required closer to one year. The regulatory review will depend on the SEC's assessment of market manipulation safeguards and custody solutions for privacy-focused assets.
Final Thoughts
Grayscale's expansion into privacy-focused ETF products reflects broader institutional recognition of cryptocurrencies offering enhanced transaction confidentiality. Zcash's dual-transaction model - supporting both transparent and shielded transfers - distinguishes it from other privacy protocols by maintaining optional auditability for regulatory compliance.
The filing represents Grayscale's continued strategy of converting existing trusts into exchange-traded products following regulatory clarity on spot cryptocurrency ETFs. Recent conversions included XRP, Solana and Dogecoin funds, though the Dogecoin ETF debut saw tepid first-day trading volume of just $1.4 million.
Privacy coin regulation remains contentious globally, with some exchanges imposing compliance restrictions due to concerns about illicit use. However, Zcash's selective disclosure features and zero-knowledge cryptography upgrades like Sapling and Halo 2 aim to balance privacy with institutional governance requirements.
If approved, the ETF would mark the first regulated U.S. investment vehicle specifically for a privacy-preserving cryptocurrency, potentially establishing a template for similar products. The conversion would also allow Grayscale to potentially expand regional availability beyond qualified investors once listed on a major exchange.
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