Arthur Hayes tells Zcash holders to shield coins on wallets

BitMEX co-founder Arthur Hayes has called on Zcash holders to withdraw their tokens from centralized exchanges and activate the cryptocurrency’s privacy features through a process called shielding. Hayes made the recommendation on Wednesday through social media platform X, telling holders to move their ZEC tokens to self-custodial wallets and shield them. 

The statement comes during a period of significant price volatility for Zcash, which saw the token rally to $723 on Saturday before plunging to $504 on Sunday. The cryptocurrency then climbed back to $677 on Monday before experiencing another sharp drop. At the time of Hayes’s comments, ZEC was trading around $450, representing a 37% decline from its Saturday peak.

The privacy features Hayes referenced are central to Zcash’s design but are not typically available through centralized exchanges. Zcash operates with two distinct types of addresses: transparent addresses called t-addresses and shielded addresses known as z-addresses. Transparent addresses function like standard public cryptocurrency wallets, where all transaction details are visible on the blockchain. Shielded addresses use zero-knowledge proofs, specifically zk-SNARKs technology, to hide information about the sender, receiver and transaction amounts.

Most centralized exchanges only support transparent ZEC addresses, which means transactions conducted through these platforms are fully traceable on the blockchain. To access the shielded transfer feature that makes Zcash function as a privacy coin, users must transfer their tokens to self-custodial wallets that support zk-SNARK operations. Without this transfer and shielding process, Zcash tokens held on exchanges lose the privacy protections the cryptocurrency was designed to provide.

Hayes’s recommendation reflects concerns within the privacy-focused cryptocurrency community about how exchange custody undermines anonymity features. When ZEC remains on a centralized exchange, users face several risks beyond the loss of privacy. These include potential withdrawal freezes, compliance with Know Your Customer policies and the possibility of delisting. These same risks have affected Monero, another major privacy coin, over recent years as exchanges have responded to regulatory pressures by removing privacy-focused cryptocurrencies from their platforms.

The call for self-custody highlights a fundamental tension in cryptocurrency between convenience and user control. While centralized exchanges offer easier trading and management, self-custody protects users from exchange insolvency and regulatory actions that could freeze or restrict access to assets. Self-custody requires users to take on more responsibility, including securely managing private keys, maintaining backups and using verified wallet software.

As GNcrypto covered previously, Zcash experienced significant price appreciation leading up to Hayes’s comments, crossing $370 for the first time since 2018. The cryptocurrency gained additional momentum after Unichain added support for Zcash on October 30, while payment platform MoonPay announced integration for DeFi trading.