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

Grayscale has filed a proposal to convert its zcash">Zcash trust into an exchange‑traded fund (ETF) that would trade on NYSE Arca under the ticker ZCSH. The filing outlines a 2.5% annual sponsor fee and highlights a possible ownership concentration by Digital Currency Group (DCG) affiliates.

Proposed fee structure

The sponsor fee would accrue daily at an annual rate of 2.5% and be paid in ZEC. Over time, the fee reduces the number of ZEC tokens represented by each share. For the first 12 months after the ETF becomes effective, Grayscale plans to allocate all fee revenue to marketing the trust and supporting Zcash development, marketing, and education. The fee remains in place beyond that period.

ETF mechanics and price tracking

The ETF would rely on authorized participants to create or redeem 10,000‑share baskets when the market price of ZCSH deviates from the net asset value (NAV) of the underlying ZEC holdings. Historically, the trust’s shares have shown large premiums and discounts, with a maximum 240% premium and a 55% discount recorded between October 2021 and June 2026. The average premium was 53% and the average discount 19%, with shares closing below NAV on 700 days.

Potential DCG ownership stake

The filing notes that DCG International Investments Ltd. and related affiliates could acquire up to 200,000 ZEC. Based on a June 30 snapshot, the trust had 4,829,300 shares outstanding, each representing about 0.0805 ZEC. Adding 200,000 ZEC would create roughly 2.485 million new shares, representing about 34% of the enlarged share count, assuming no other changes. The filing also reports 757,202 shares classified as related‑party holdings, which together would amount to about 44.3% of the total, still below a majority.

Risks and uncertainties

While the basket creation/redemption process is intended to narrow price gaps, several factors could limit its effectiveness, including cash‑order constraints, limited ZEC market liquidity, and potential suspension of creations or redemptions. Concentrated ownership by DCG affiliates could also affect trading dynamics and lead to volatility if large sales occur.