Grayscale Investments has filed a registration statement with the U.S. Securities and Exchange Commission (SEC) to convert its Grayscale Zcash Trust into a spot Zcash exchange-traded fund (ETF). The filing, submitted on Wednesday, signifies a major step in bringing a privacy-focused cryptocurrency to the regulated ETF market. If approved, this would be the first U.S.-listed ETF dedicated solely to Zcash (ZEC), a cryptocurrency that emphasizes user privacy.

The proposed ETF aims to mirror the price of Zcash, while accounting for the trust's expenses. According to the SEC filing, the ETF's objective is for the share value to reflect the value of ZEC held by the Trust, based on the Index Price, minus expenses and liabilities. The ETF will hold actual Zcash and track the CoinDesk Zcash Price Index. The filing also supports a rule change that would allow the ETF to be listed and traded on the NYSE Arca, pending approval.

Grayscale's move to file Form S-3 with the SEC streamlines the conversion process, making it easier than traditional ETF registrations. The company qualifies for this type of transition due to its size, reporting history, and previous conversions of trusts into ETFs. Grayscale previously converted its Bitcoin and Ethereum trusts into spot ETFs in 2024, setting a regulatory and operational precedent for the Zcash product. Over the past month, Grayscale has converted several closed-end trusts into ETFs, including those tracking XRP, Dogecoin, and Solana.

As of Tuesday, the Grayscale Zcash Trust has over $196 million in assets under management. If the conversion is approved, these assets would be moved into the new ETF structure. The proposed ETF would allow for the creation and redemption of shares in-kind using baskets of ZEC. The fund will have a sponsor fee of 2.5% per annum.

Zcash is a privacy-focused cryptocurrency launched in 2016 by the Zerocoin Electric Coin Company. It is designed to offer enhanced privacy to its users. ZEC's price has increased significantly over the past year. Zcash's ability to provide regulator-friendly privacy is drawing attention from investors.

The potential launch of a Zcash ETF has sparked debate within the crypto community. Some analysts believe Zcash could draw support away from Bitcoin, while others view it as a complementary asset for private transactions. Despite concerns, the ETF filing reflects Zcash's increasing mainstream adoption and the growing demand for zero-knowledge encryption.