Grayscale Files for Zcash ETF Conversion with 2.5% Fee, Flagging Potential 34% DCG Ownership Stake

Grayscale’s proposed conversion of its Zcash trust into an exchange-traded fund would carry a 2.5% annual sponsor fee. According to a June 30 ownership snapshot, an affiliate of Digital Currency Group (DCG) could hold approximately 34% of the fund if current discussions materialize. The Amendment No. 5 filing, submitted to the SEC on August 21, would rename the vehicle “The Zcash ETF” and list it on NYSE Arca under the ticker ZCSH. The registration remains preliminary; securities cannot be sold under it, and the SEC has neither approved nor disapproved the offering.

The ETF structure is designed to resolve the trust’s persistent price-tracking issues. Authorized participants—large market intermediaries—would create or redeem 10,000-share baskets when ZCSH’s market price deviates from the net asset value (NAV) of the underlying Zcash (ZEC) holdings. Grayscale anticipates this arbitrage mechanism will narrow the gap between market price and NAV.

Historical tracking deviations were substantial. From October 18, 2021, through June 30, 2026, ZCSH traded at a maximum premium of 240% and a maximum discount of 55% to NAV. The average premium stood at 53%, while the average discount was 19%. Shares closed below NAV on 700 trading days. The filing noted the discount had narrowed to 1% as of August 20, prior to the proposed ETF structure becoming operational.

Amendment No. 5 adds investor economics to the conversion’s market-structure rationale and its regulated-privacy considerations. The 2.5% sponsor fee, which already applies to the trust, accrues daily and is paid in ZEC, gradually reducing the tokens represented by each share. For up to 12 months after effectiveness, Grayscale intends to allocate all fee revenue toward trust marketing and initiatives supporting Zcash development, marketing, and education. The plan is voluntary, revocable, and leaves the 2.5% fee unchanged.

What 200,000 ZEC Would Mean for Ownership

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

The June 30 accounts provide a static reference point. At that date, the trust had 4,829,300 shares outstanding, each representing approximately 0.0805 ZEC. At that ratio, a contribution of 200,000 ZEC would create roughly 2.485 million shares, equating to about 34% of the enlarged total, assuming no other creations, redemptions, or ratio changes.

The quarterly report classified 757,202 shares as related-party holdings. Combined with the potential DCG International allocation, this produces approximately 44.3%—below a majority. This figure treats those shares as a collective group without attributing them to a single DCG holder and serves only as a snapshot; a different contribution, affiliate holdings, or share base could yield a different result.

The basket creation and redemption process aims to keep ZCSH trading closer to NAV, though perfect tracking remains uncertain. 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 trigger volatility, price declines, and renewed discounts.

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