Zcash ETF (ZCSH): what is inside and what the prospectus does not say

Grayscale's Zcash ETF (ZCSH), the first spot ETF for a privacy coin in the United States, has been trading on NYSE Arca since August 25, 2026, holding 387,849 ZEC —valued at $304.5 million on that date— and its final prospectus (424B3 dated August 24) does not state whether they are held in shielded or transparent addresses. The document mentions shielded transactions (those that hide sender, receiver, and amount via cryptographic proofs) sixteen times and non-shielded transactions (visible on-chain like Bitcoin) four times, yet none of those twenty mentions appear in the same sentence as the custodian. The custodian is Coinbase Custody Trust Company, LLC, a New York Department of Financial Services (NYDFS) licensed limited purpose trust company, the supervisor that since 2023 has required express approval —with no self-certification possible— for coins with features designed to hide the identity of a person or entity. What follows breaks down the product piece by piece: what it contains, who guards it, how much it costs annually, who funds it, and what is not recorded in writing three days after its debut.

What does the Zcash ETF from Grayscale that began trading on August 25 contain?

The Grayscale Zcash Trust is not new: it was established on October 23, 2017, and had been trading on OTCQX —the top tier of the U.S. over-the-counter market— since October 2021, already under the symbol ZCSH. In August 2026, the wrapper changed. On the 24th, the name "The Zcash ETF" was registered in Delaware, NYSE Arca issued its certification letter, and Grayscale filed the final prospectus (Form 424B3, registration 333-291800), refiled on the 25th only to correct the CUSIP (security identifier code) to 38964G108. These are the components that the document establishes in writing.

The first session saw $14.8 million in volume: it rose by more than 3.5% (peaking at $66.61) and closed at $63.10, a −1.54% drop compared to the August 24 close of $64.09 on OTCQX. The latest data included in the prospectus is the OTCQX close from August 20: $45.34 with a 1% discount to net asset value. That discount reached as high as 55% at points since 2021, and the ETF's continuous creation and redemption mechanism is the tool designed to close it, as explained in what exactly is a crypto ETF.

Does the Zcash ETF hold its ZEC in shielded or transparent addresses?

The final prospectus for The Zcash ETF (ZCSH, sponsored by Grayscale; 424B3 filed with the SEC on August 24, 2026) does not state whether the fund's 387,849 ZEC are in shielded or transparent addresses. It describes in detail the two classes of network transactions —shielded, where a zero-knowledge proof (zk-SNARK) replaces visible information, and non-shielded, which the text itself notes are suitable for "selectively disclosing information when required for regulatory compliance"— yet no passage associates either type with the trust's wallet.

The The Zcash ETF prospectus notes that from the genesis block until June 30, 2026, 45% of network transactions were transparent, in 45% one of the two parties used a shielded address, and in 10% both did. Thus, 55% of historical activity touches the shielded side at least at one end. A fund that decided to operate only on the transparent side would be working with the smaller half of actual network usage, and such a decision is not on record.

The answer changes what a shareholder can verify. With the portfolio in transparent addresses, anyone can verify the 387,849 units against the chain using a block explorer; with the portfolio in shielded addresses, verification depends on the custodian sharing viewing keys with whomever it chooses and whenever it chooses.

There is also a recent operational reason for this distinction to matter. The prospectus notes the Orchard circuit vulnerability revealed in June 2026 —which allowed for the creation of counterfeit ZEC without leaving an accounting trace— and the Ironwood update on July 28, 2026, which removed that pool and introduced a new one with a "turnstile": outflows cannot exceed what has been verifiably deposited. A fund operating on the shielded side would work under that limit for every withdrawal. The full breakdown of the flaw is in our piece on the Orchard circuit bug.

What would resolve this omission is specific: a subsequent amendment specifying address management, or the publication of the custody policy.

What does the NYDFS require from Coinbase Custody to hold the ETF's ZEC?

To custody the ETF's ZEC, Coinbase Custody relies on the NYDFS greenlist. This list dictates which coins a New York-licensed entity can handle. The original version from June 2020 separated approved coins into two columns: one for custody and one for public listing; XRP and Ethereum Classic appeared only in the former. The guidance proposed on September 18, 2023, and finalized on November 15, 2023, replaced that scheme with a single list —of coins that entities can custody or list—, shortened it, removed XRP, and added a condition that applies directly to this case: coins with "features designed to facilitate the hiding or cloaking of the identity of a person or entity" cannot be self-certified; they require express approval from the department.

The NYDFS greenlist, reduced since 2023 to Bitcoin, Ether, and six stablecoins and closed to self-certification for coins with cloaking features, does not include ZEC. If the 2023 guidance applies to custody that already existed when it was published —Coinbase Custody has held the trust's ZEC since before that date— the path would have had to be express approval from the department. The document supporting that custody is not public, and the prospectus does not reproduce it.

"Coinbase" groups four perimeters with different supervisors, and the prospectus names them separately:

Why does the Zcash ETF charge 2.5% while Bitcoin ETFs charge between 0.14% and 0.25%?

The Zcash ETF (ZCSH) charges a 2.5% annual fee payable in ZEC: on 387,849 ZEC at $794.05 (August 28, 2026, 06:30 UTC / 08:30 CEST), a portfolio of approximately $308.0 million, this amounts to about $7.7 million or 9,700 ZEC per year, roughly 27 per day. The fee is deducted from the fund's own assets, meaning the ZEC backing each share decreases unless new shares are created.

The prospectus does not explain the fee but lists operational components that Bitcoin products lack. The index valuing the portfolio is formed by Binance, Gemini, Kraken, and OKX; Coinbase, the fund's prime broker, is not among the initial constituents. The weights per pair are highly unequal, and the prospectus defines the base: they are shares of volume from a broader set of platforms including several outside the index —Binance.US, Bitfinex, Bitstamp by Robinhood, Coinbase, and MEXC— with data since January 1, 2024. In the ZEC-dollar pair, Kraken contributes 23.74%, Gemini 2.17%, and OKX 0.03%: the three constituents total 25.94%, while the remaining 74% is traded on platforms the index does not track. In ZEC-USDC, Binance concentrates 85.51%. Every outflow is paid by selling ZEC for dollars across that set of order books.

The fair benchmark for judging the 2.5% is GBTC: a converted product, same issuer, 1.50% on an asset with over a dozen competing ETFs and custody without the address-type unknown. The Zcash premium over that benchmark is 67%. Whether this is justified will be determined by the premium or discount of the shares relative to their net asset value, which has been published daily since August 25.

Who provides the ZEC for the Zcash ETF and how much does DCG weigh?

The fourth amendment to the registration, dated August 18, 2026, revealed that DCG International Investments Ltd. —a subsidiary of Digital Currency Group, the same group the sponsor belongs to— is in non-binding talks to contribute approximately 200,000 ZEC in exchange for shares, via an authorized participant. The document calls this contribution "a substantial portion" of the trust. The math supports the adjective.

The 200,000 ZEC were worth about $110 million at the price of the August 18 amendment (near $550) and about $158.8 million at the $794.05 price on August 28: same amount of coin, two different dates.

One-third of the fund would come from a single contributor linked to the sponsor, in a deal that as of August 28, 2026, remains unsigned.

How did ZCSH reach NYSE Arca eight days before September 2?

Since the SEC approved generic listing standards on September 17, 2025, an exchange can list a spot digital commodity product without individual approval if the asset meets any of the rule's criteria; the most common requires a future on the asset to have traded on a registered market (DCM) for at least six months. ZCSH began trading on NYSE Arca on August 25, 2026, eight days before September 2, when the Coinbase Derivatives ZEC perpetual future (tradable since March 2) would meet the six-month DCM requirement for the SEC's generic path.

Which criterion NYSE Arca applied is not stated in the prospectus, which mentions neither the generic listing rule, nor the six-month period, nor rules 5.2 or 8.201 under which these products are listed. The certification letter the exchange filed with the SEC on August 24 also cites no specific criterion: it certifies approval for listing and registration of shares "under the Exchange Act of 1934," and nothing more. Several verifiable explanations are possible —another rule criterion, another contract on another registered market with an earlier date— but none are in the documents provided to investors. The arithmetic of these timelines, asset by asset, is in our altcoin ETF eligibility calendar, closed on August 8 with fifteen assets and without Zcash among them.

Zcash vs. Monero: Why doesn't Monero have an ETF in the United States?

In Zcash, the user chooses between a transparent address and a shielded address, and a regulated platform can operate solely on the transparent side; in Monero, privacy is a protocol property and cannot be deactivated by account or jurisdiction. Listing trajectories diverged for this reason: 73 exchanges delisted XMR and its price rose 120%, a move that occurred outside regulated markets. Coinbase, Inc. never listed Monero in the United States; ZEC remains listed there, while Coinbase UK, Bittrex, and OKX delisted it starting in 2019 according to the prospectus itself.

The market has followed that difference. As of August 28, 2026, at 06:30 UTC (08:30 CEST), ZEC was trading at $794.05 with a market cap of $13.42 billion, compared to $460.98 and $8.66 billion for XMR. In the prospectus, closed with data as of June 30, Zcash's market cap was $6.7 billion, ranking twelfth among crypto assets.

The distinction between optional privacy and protocol privacy has a geographic limit. The European Union's Anti-Money Laundering Regulation (AMLR), applicable from July 10, 2027, prohibits crypto-asset service providers in Article 79 from maintaining accounts with coins that increase anonymity, and its definition expressly covers those offering that feature optionally. Japan removed them from platforms in 2018, South Korea in 2021, and Dubai's virtual asset regulator prohibits tokens with enhanced anonymity. Zcash's advantage is specific to the U.S. perimeter.

This reasoning fails if Monero secures an equivalent exchange-traded vehicle in the U.S., or if a subsequent amendment expressly excludes Zcash's shielded side from the fund. As of August 28, 2026, there are no active applications for an XMR exchange-traded product before the SEC. The technical foundation of shielded transactions is in privacy and security in crypto.

What signals remain to be checked in the Zcash ETF?

Five, each with its own document and publication schedule:

1. An amendment specifying addresses. This turns "privacy coin ETF" into either an accurate description or a marketing label. Look for this in a filing subsequent to the August 24 424B3 or in Coinbase Custody's custody policy.
2. DCG's signature. As long as the 200,000 ZEC remain a non-binding conversation, the fund's size has a 34% unknown factor. This would appear in an 8-K or a new amendment.
3. Premium or discount to net asset value. The trust came from a maximum discount of 55% since 2021 and 1% on August 20; since August 25, it is published daily and serves as the market's verdict on the 2.5% fee.
4. Daily holdings. The fee paid in ZEC drains about 9,700 ZEC per year from the initial 387,849; Grayscale's fact sheet allows one to see if inflows offset this drain.
5. Enabling in-kind redemptions. This would change the impact of outflows on the ZEC spot market, the narrowest link in the chain.

Anyone opening the prospectus finds the custodian, the prime broker, the administrator, the fee, the index, the creation unit, and the prohibition on in-kind redemptions. They do not find which type of Zcash address holds the 387,849 units backing their shares, which is the data point that separates a product on a privacy coin from a product on its public half.

Sources and Links: SEC EDGAR — The Zcash ETF final prospectus 424B3 · SEC EDGAR — S-3/A No. 5 (Aug 21, 2026) · SEC EDGAR — Original S-3 (Nov 26, 2025) · SEC EDGAR — 8-K with planned date · SEC EDGAR — 10-Q as of June 30, 2026 · SEC EDGAR — NYSE Arca certification letter (Form CERT, Aug 24, 2026) · CFTC — Zcash Perp Style Futures self-certification · NYDFS — Final virtual currency listing guidance (Nov 15, 2023) · NYDFS — Proposed guidance (Sep 18, 2023) · Greenberg Traurig — The greenlist change · Cointelegraph — The 2020 greenlist · The Block — DCG contribution talks · Grayscale — Debut press release (Aug 25, 2026) · Bitcoin World — ZCSH first day volume and close · Yahoo Finance — ZCSH price series · Crypto Briefing — NYSE Arca debut · Yahoo Finance — ZEC eight-year high · Dechert — Generic listing standards · The Defiant — AMLR Article 79 · EUR-Lex — Regulation (EU) 2024/1624, Article 79 · CoinDesk — MSBT 0.14% fee