Grayscale Pursues Historic Zcash ETF: Privacy Crypto Enters Regulated Markets

Source: CoinTribune Original Title: ETF: Grayscale Prepares a Revolution with Zcash Original Link: https://www.cointribune.com/en/etf-grayscale-prepares-a-revolution-with-zcash/

Summary

Grayscale submitted a Form S-3 to the SEC on November 26 to convert its Zcash Trust into a spot ETF, which would be the first American ETF linked to a privacy-focused cryptocurrency.

Key Points

Grayscale’s Unprecedented Move

Grayscale aims to launch the first American ETF based on Zcash, a cryptocurrency focused on privacy. The fund would be listed on NYSE Arca and follow the CoinDesk Zcash Price Index. This move continues Grayscale’s successful ETF strategy, following approvals for Bitcoin, Ethereum, Dogecoin, and XRP. The current Zcash Trust holds approximately 150 million dollars in ZEC, which would migrate to the new structure upon SEC approval.

Market Momentum

The ZEC token price has surged over 1,000% year-on-year, reaching $735. This increase reflects renewed institutional interest, strengthened by major institutional moves into Zcash. The ETF would operate through the standard creation and redemption model using ZEC baskets, with Grayscale planning annual fees of 2.5%.

Regulatory Challenge: Privacy vs. Compliance

Zcash’s zero-knowledge proof technology masks transaction data, raising significant regulatory questions. While innovative, this privacy mechanism could complicate compliance with KYC and AML standards. Grayscale is leveraging the simplified S-3 procedure based on its experience and size, though the SEC may require additional guarantees given ZEC’s anonymous nature.

Market Implications

Approval of a Zcash ETF would mark a turning point in integrating privacy-focused crypto-assets into regulated finance. Success would test regulatory limits and potentially pave the way for similar privacy-coin projects in traditional markets.