Grayscale Investments Files For Privacy ETF With Emphasis on ZCash

Asset management firm Grayscale Investments is looking to expand its offering to include privacy-centered ETFs and as such, it is now seeking approval for a new application filed with the United States Securities and Exchange Commission (SEC).

Grayscale’s Privacy-Focused ETF Awaiting SEC Greenlight

Amidst the growing outflows on Grayscale’s Bitcoin Trust (GBTC), the firm is gradually pivoting to other forms of exchange-traded products (ETP). This potential privacy-centered ETF will be an index-based fund designed to track the performance of companies across five key sub-themes of the data privacy sector.

The sub-themes are data service solutions, cyber service providers, blockchain-based privacy solutions, network and communication security providers, and privacy-preserving protocols. Companies that will be eligible for inclusion are those that can derive about 50% of their revenues from these sub-themes.

Eligible firms are required to publicly trade in the United States, non-US developed markets or even emerging markets’ stock exchanges. Additionally, they must have up to $250 million in market capitalization and meet certain other specific liquidity criteria. 

If Grayscale receives approval from the U.S. regulator, it will be the first asset manager to capture the emerging privacy technology and cybersecurity sector.

According to Grayscale’s Global Head of ETFs, David LaValle, this initiative is aimed at promoting the core importance of upholding privacy and security in today’s world. In addition, it will offer investors a new way to engage with this vital sector. 

Grayscale to Integrate ZCash

To bring the Grayscale privacy-centered ETF dream to reality, there are plans for a 10% allocation of funds to Grayscale ZCash Trust (ZCSH), a fund that invests in ZCash (ZEC). As of Wednesday, Grayscale’s website already confirmed that the fund holds about $7.7 million worth of crypto tokens. 

Notably, ZCash is a privacy cryptocurrency similar to the likes of Monero (XMR) and Dash (DASH). Cryptocurrencies of this nature help users to keep their sensitive financial transactions to themselves. At the same time, they are believed to be a tool for illicit activities, hence their ban on platforms like Binance.

Arguably, pursuing this privacy-centered ETF may be one of Grayscale’s strategies to fight and rebalance the massive outflows from its spot Bitcoin ETF GBTC. With the diversification of capital, the pressure on GBTC as showcased in its outflow data might be reduced.

Apart from this new proposal, Grayscale has equally initiated private placement subscriptions for select cryptocurrency trusts including Grayscale Bitcoin Cash Trust, Grayscale Chainlink Trust, Grayscale Litecoin Trust, Grayscale Solana Trust, and Grayscale Stellar Lumens Trust, all accessible to accredited investors.