Grayscale Investments has filed a Form S-3 with the US Securities and Exchange Commission (SEC) to convert its existing ZCash Trust into a publicly traded spot ETF. With approximately 199 million USD in assets under management, this would be the first regulated spot ETF for a privacy coin in the United States.
The proposed fund is set to trade under the ticker ZCSH on NYSE Arca. The filing comes at a time when ZCash (ZEC) has surged more than 1,000% over the past three months, currently trading around 500 dollars. Grayscale, a subsidiary of Digital Currency Group, justifies the move by pointing to the growing importance of privacy in the crypto ecosystem. As privacy becomes a foundational building block across the entire crypto sector, the company views ZEC as an important component of a balanced digital asset portfolio. The conversion follows the model of the highly successful transformation of the Grayscale Bitcoin Trust (GBTC) into a spot ETF in early 2024, but raises far more complex regulatory questions.
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Privacy coins meet regulatory compliance requirements
The SEC filing marks a historic precedent: for the first time, a privacy coin could become accessible to institutional and retail investors in the US through a fully regulated investment product. ZCash uses zero-knowledge proofs (zk-SNARKs), a cryptographic technology that allows transactions to be verified without revealing sender, receiver, or transaction amount. These so-called “shielded transactions” directly conflict with Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) requirements that apply to regulated financial products.
For the planned ETF, Grayscale has established an infrastructure aligned with institutional compliance standards. Coinbase Custody will serve as the custodian for ZEC holdings, while Bank of New York Mellon will act as administrator – the same partners used for Grayscale’s Bitcoin and Ethereum ETFs. Critics, however, argue that using Coinbase as prime broker and custodian limits the anonymity advantages of ZCash: all deposits and withdrawals would flow through a regulated exchange that collects full KYC data.
Regulatory evaluation is also likely to spark debate over whether ZCash should even be classified as a privacy coin. Unlike Monero, where all transactions are obscured by default, ZCash offers both transparent and shielded transactions. According to Chainalysis data, less than 5 percent of all ZEC transactions use its fully shielded features. This technical flexibility may benefit SEC approval, but simultaneously raises questions about the asset’s actual privacy functionality.
Contrast with EU regulation and institutional signaling
While Grayscale is pursuing a privacy-coin ETF in the US, the European Union is taking the opposite approach. The Transfer of Funds Regulation (TFR), adopted in June 2023, requires crypto service providers to stop processing transactions involving privacy coins such as Monero, ZCash, and Dash from July 2027 onward. The EU Commission cites the “inherent risks of money laundering and terrorist financing” associated with anonymous transactions. Several European exchanges, including Kraken and Binance, have already removed privacy coins from their listings preemptively.
The US and Europe are taking fundamentally different paths regarding privacy coins. If the SEC approves the ZCash ETF, US regulators would be acknowledging privacy-enhancing technologies within a regulated framework – a clear signal of technological openness. The EU, however, prioritizes enforceable financial regulation over technological innovation. For Swiss investors, who generally have access to both markets, this creates a complex dynamic: a US ETF would be accessible via brokers, while direct trading of privacy coins in the EU is becoming increasingly restricted.
A new era for privacy coins?
The institutional signaling power of Grayscale’s filing goes beyond ZCash itself. Following successful conversions of its Bitcoin and Ethereum trusts, the Digital Currency Group is systematically testing the regulatory limits for altcoin ETFs. In October 2024, Grayscale filed for a Solana ETF, which met with lukewarm demand – a sign of skepticism toward altcoin products outside the most established assets. A ZCash ETF would be considerably more controversial: while Solana is primarily positioned as a smart contract platform, ZCash’s core utility lies explicitly in transaction obfuscation.
The filing is more than just another ETF attempt. Grayscale is testing whether privacy technology and regulation can coexist. Banks and fintechs already rely on zero-knowledge proofs for privacy-friendly compliance. SEC approval would legitimize this approach – whereas a rejection would push privacy-tech further out of the regulated financial system.
What ZCash actually is
ZCash was launched in 2016 by a team led by cryptographer Zooko Wilcox as a copy (fork) of Bitcoin, with the explicit goal of integrating optional privacy. The technology is based on zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge), which allow validating transactions without revealing their contents. Unlike Bitcoin’s transparent blockchain, where all transactions are publicly traceable, ZCash users can choose between transparent “t-addresses” and shielded “z-addresses.”
This technical flexibility differentiates ZCash from Monero, the next-largest and often leading privacy coin, with a market capitalization of roughly 7.6 billion dollars. While Monero uses default privacy – all transactions are obscured – ZCash allows selective disclosure. Users can, for example, provide tax authorities or auditors with so-called “viewing keys” that reveal specific transactions without exposing the entire wallet. This feature may aid regulatory acceptance but reduces anonymity compared with Monero.
Demand for privacy technologies in the crypto sector is structurally driven by increasing on-chain surveillance. Companies like Chainalysis and Elliptic provide authorities and banks with tools to trace Bitcoin and Ethereum transactions back to individual identities. This creates incentives for users to migrate to privacy coins – a trend reflected in trading volumes. Average daily trading volume for ZCash rose to more than 2 billion dollars in November 2025, compared to around 200 million dollars the previous year.
Outlook: approval process and industry trends
The SEC approval process for a ZCash ETF is expected to take several months and will likely be far more contentious than Bitcoin or Ethereum products. The agency must balance promoting financial innovation with enforcing anti-money-laundering regulations. There are no precedents: while privacy technology in other areas (such as end-to-end encrypted messaging) is broadly accepted, financial products face stricter standards. The SEC may impose additional compliance requirements, such as monitoring systems for suspicious transaction patterns or limits for institutional investors.
Industry experts do not expect a decision before the second quarter of 2026. If the SEC approves the product, it would mark a paradigm shift. Privacy coins would no longer be regulatory outliers but part of the established financial ecosystem. This could spark a wave of additional privacy-tech products – ranging from ETFs for other privacy coins to traditional financial instruments with integrated zero-knowledge features. A rejection, however, would reinforce the narrative that privacy and compliance are incompatible, pushing privacy coins further to the margins of regulated markets.
Grayscale’s filing highlights a core tension. Can a privacy coin be regulated without losing its essential purpose? An ETF would make ZCash accessible to millions of investors – but every transaction would go through Coinbase Custody and BNY Mellon, subject to full KYC controls. The anonymity ZCash promises is virtually absent within the ETF wrapper. For investors, performance ultimately matters more. With ZEC trading near 500 dollars and up 1,000 percent in three months, the debate becomes less philosophical and more practical: profit-taking versus SEC risk. If the filing fails, the price may face pressure. If successful, institutions could buy a “privacy coin” that has been effectively stripped of its anonymity in a regulated format.
