Grayscale’s Zcash ETF filing proposes a 2.5% fee and a potential 34% DCG stake

Grayscale’s proposed Zcash ETF would carry a 2.5% annual fee. Under one dated ownership calculation, a DCG affiliate could receive about 34% of the fund. If effective, the Aug. 21 SEC amendment would rename the existing trust “The Zcash ETF” and list it on NYSE Arca under ZCSH. The registration remains preliminary. The securities cannot yet be sold under it, and the SEC has neither approved nor disapproved them.

The ETF structure aims to fix the trust’s long-running price-tracking problem. To do that, large market intermediaries called authorized participants would create or redeem 10,000-share baskets when ZCSH’s market price moves away from the net value of the Zcash tokens, or ZEC, held by the fund. Grayscale expects that arbitrage to bring the two prices closer together.

The historical gaps were extreme. From Oct. 18, 2021, through June 30, 2026, ZCSH recorded a maximum 240% premium and a maximum 55% discount to net asset value. ZCSH’s average premium was 53%, and its average discount was 19%. The shares closed below NAV on 700 days. The filing placed the discount at 1% on Aug. 20, before the proposed ETF structure was operating.

Amendment No. 5 adds investor economics to the conversion’s market-structure case and its regulated-privacy question. The sponsor fee already applies to the trust. It accrues daily at 2.5% a year and is paid in ZEC. Over time, that reduces the tokens represented by each share. For up to 12 months after effectiveness, Grayscale intends to use all fees it receives for trust marketing and initiatives supporting Zcash development, marketing and education. The plan is voluntary, revocable and leaves the 2.5% fee intact.

The filing warns that Digital Currency Group could own a majority through DCG International Investments Ltd. and other affiliates. That position could let the group control the trust’s limited shareholder votes and create conflicts with other investors. The warning is conditional: Grayscale’s discussions with DCG International are nonbinding, and the affiliate may acquire more, fewer or no shares.

The June 30 accounts provide a static way to test the indicated amount. The trust had 4,829,300 shares outstanding, each representing about 0.0805 ZEC. At that ratio, 200,000 ZEC would create about 2.485 million shares, or roughly 34% of the enlarged total, assuming no other creations, redemptions or ratio change.

The quarterly report classified 757,202 shares as related-party holdings. Adding them together produces about 44.3%, below 50%. This figure treats those shares as a collective group without attributing them to one DCG holder and serves only as a snapshot. A different contribution, affiliate holdings, or share base could produce a different result.

The basket process aims to keep ZCSH closer to NAV. Perfect tracking remains uncertain, however. Cash-order constraints, unavailable liquidity providers, suspended creations or redemptions, and limited ZEC-market liquidity could disrupt arbitrage. Concentrated ownership could also impede active trading. Large sales, or the perception of them, could cause volatility, price declines, and fresh discounts.

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