Grayscale Zcash ETF Begins Trading on NYSE Arca: 2.5% Annual Fee, No In-Kind Redemption at Present

Grayscale's Grayscale Zcash Trust has converted into an exchange-traded fund (ETF) and began trading on August 25 local time on NYSE Arca, part of the New York Stock Exchange, under the ticker "ZCSH." It is the first ETF in the United States to hold Zcash directly. The fund holds Zcash (ZEC), a crypto asset with a shielded function that can conceal a transaction's sender, receiver, and amount, but it is not structured so that investors receive ZEC itself to send or use in shielded transactions. According to the prospectus filed with the SEC, the fund continuously issues shares in baskets of 10,000 shares. Authorized Participants (APs) may apply for creations either in kind, by depositing ZEC directly, or in cash. In-kind redemption, on the other hand, is not permitted as of the date of the prospectus. Accordingly, redemptions by Authorized Participants are also processed only in cash, and ordinary investors cannot apply for redemption directly with the trust and must instead sell ETF shares on the exchange. The sponsor's fee is 2.5% per year. Grayscale said that for up to 12 months after the registration statement takes effect, it will use the entire amount of fees received to support the development and growth of the Zcash ecosystem and the marketing of ZCSH. However, this is a voluntary commitment carried out with the sponsor's own funds after the fees are received, is not an obligation of the trust, and can be changed or discontinued by the sponsor at any time. Separately, The Block reported that the Zcash Trust's assets under management exceeded $313.5 million as of August 24. With this listing, investment access to a privacy asset through a regulated securities market has widened, but what has been listed on the market is an interest in a trust that holds ZEC, not a right for investors to use the Zcash network.