Grayscale has proposed converting its existing Zcash trust into an exchange-traded fund with an annual fee of 2.5%, while a Digital Currency Group affiliate could end up owning approximately 34% of the enlarged fund under one ownership calculation.
The proposed product would be renamed The Zcash ETF and listed on NYSE Arca under the ticker ZCSH, according to an amendment submitted to the United States Securities and Exchange Commission on 21 August. The registration is still preliminary: the securities cannot yet be sold under the filing, and the SEC has not approved or rejected the proposal.
The ETF structure is designed to address the trust’s long-standing difficulty in tracking the value of the Zcash tokens, or ZEC, held by the fund. Under the proposed arrangement, authorised participants would create or redeem baskets of 10,000 shares whenever ZCSH’s market price diverged from the fund’s net asset value.
Grayscale expects that process to allow market participants to take advantage of price differences and bring the share price and the value of the underlying ZEC closer together.
Historically, the gap has been substantial. Between 18 October 2021 and 30 June 2026, ZCSH reached a maximum premium of 240% to net asset value and a maximum discount of 55%. Across that period, its average premium was 53%, while its average discount was 19%. The shares closed below net asset value on 700 days.
The filing recorded a discount of 1% on 20 August, before the proposed ETF mechanism had begun operating.
Fee and potential DCG control
Amendment No. 5 sets out the financial terms for investors alongside the proposed market-structure changes and the filing’s discussion of privacy-related regulatory issues.
The 2.5% sponsor fee already applies to the trust. It is accrued daily, charged annually at that rate and paid in ZEC, meaning the amount of Zcash represented by each share declines over time.
For up to 12 months after the proposal becomes effective, Grayscale says it plans to use all fees it receives for marketing the trust and for initiatives supporting Zcash development, marketing and education. The arrangement is voluntary and can be withdrawn, but it would not reduce the 2.5% fee.
The filing also warns that Digital Currency Group could obtain majority ownership through DCG International Investments Ltd. and other affiliates. Such a position could allow the group to control the trust’s limited shareholder votes and raise potential conflicts with other investors.
That outcome is not certain. Grayscale says its discussions with DCG International are non-binding, and the affiliate could acquire more shares, fewer shares or none at all.
The trust’s 30 June accounts provide a snapshot of how the potential ownership figure was calculated. There were 4,829,300 shares outstanding, with each share representing about 0.0805 ZEC. If 200,000 ZEC were contributed at that ratio, it would create approximately 2.485 million shares. Assuming no additional creations, redemptions or changes to the share ratio, that would represent about 34% of the enlarged total.
The quarterly report separately classified 757,202 shares as related-party holdings. When combined, those holdings amounted to about 44.3%, below the 50% threshold. That calculation treats the shares as belonging to one collective group rather than assigning them to a single DCG holder and is only a snapshot. A different contribution, affiliate ownership position or number of shares could produce a different result.
Tracking risks remain
The basket creation and redemption process is intended to keep ZCSH close to its net asset value, but perfect tracking is not guaranteed.
Restrictions on cash orders, a lack of available liquidity providers, suspended creations or redemptions and limited liquidity in the ZEC market could all interfere with arbitrage. Concentrated ownership could also make active trading more difficult.
Large sales, or concerns that large sales may take place, could trigger volatility, price falls and renewed discounts to net asset value.
Zcash was up 9.49% over the previous 24 hours and ranked 11th by market capitalisation.
Also known as “Akiba”, Liam Wright is a reporter, podcast producer and Editor-in-Chief at CryptoSlate. He believes decentralised technology has the potential to make…
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