Grayscale proposes Zcash ETF with biweekly payouts

Grayscale filed with regulators to create an exchange-traded fund–style trust that would hold Zcash (ZEC) and pay cash distributions to shareholders every two weeks, according to a recent regulatory filing.

The filing describes a tradable trust that would use available cash to make scheduled biweekly payouts. Available cash could include proceeds from selling ZEC, realized gains, or other income the trust earns.

To fund those distributions the trust would likely sell portions of its ZEC holdings or earn yield on them, creating recurring taxable events for shareholders and periodic selling pressure on the underlying market. Regular sales can reduce the trust’s ZEC exposure and create a mismatch between the trust’s share price and the coin’s market price.

The filing notes custody and compliance complications because Zcash supports optional shielded transactions using zero-knowledge proofs. Regulated custodians and compliance teams typically require visibility into transaction histories, so handling shielded ZEC could require extra safeguards or restrict the fund to transparent-chain ZEC.

The filing states management and custody fees would apply. It says investors should review whether distributions are classified as return of capital, realized gains, network rewards or other income. A twice-monthly distribution schedule increases administrative work and may raise trading costs.

Zcash’s daily trading volume is small compared with major cryptocurrencies such as Bitcoin and Ethereum. A fund that regularly sells ZEC could affect prices, widen spreads and increase execution costs. The filing says creation and redemption mechanics for shares must be defined to limit tracking error.

Grayscale has previously sought to convert other crypto trusts into ETFs and to offer crypto investment products. A Zcash-linked product that pays periodic cash differs from most spot crypto funds, which generally aim to track price without scheduled payouts.

Potential investors should review the fund prospectus for details on how distributions are calculated, the tax character of payouts, fee levels, custody arrangements and any limits on holding shielded ZEC before investing.