10-K: Grayscale Zcash Trust Reports Strong 2025 Performance

Grayscale Zcash Trust (ZEC) saw its net assets surge by 809% in 2025, driven by significant Zcash price appreciation, despite continued trading at a discount to NAV.

Summary

• The Trust's net assets increased by 809% to $200,441,000 as of December 31, 2025, up from $22,040,000 at December 31, 2024.
• Zcash (ZEC) price appreciated significantly, rising from $56.12 per ZEC on December 31, 2024, to $509.35 per ZEC on December 31, 2025.
• Net realized and unrealized gain on investment in ZEC for the year ended December 31, 2025, was $179,067,000.
• The Trust's investment objective is for the value of its Shares to reflect the value of ZEC held, less expenses and liabilities, but Shares have historically traded at both substantial premiums and discounts to Net Asset Value (NAV).
• As of December 31, 2025, the Shares were quoted on OTCQX at a 24% discount to the Trust's NAV per Share.
• The Trust does not currently operate an ongoing redemption program, which prevents arbitrage mechanisms from keeping the Share value closely linked to the Index Price.
• Grayscale Investments Sponsors, LLC (GSIS) became the sole Sponsor of the Trust effective May 3, 2025, following a reorganization and withdrawal of a co-sponsor.
• The Trust filed a registration statement on Form S-3 in November 2025 for a proposed public offering and NYSE Arca listing, with plans to rename to Grayscale Zcash Trust ETF and implement a redemption program upon approval.
• The Zcash Network operates on a proof-of-work model, utilizes zk-SNARKs for privacy-preserving transactions, and has a maximum supply of 21 million ZEC, with approximately 16.5 million ZEC outstanding as of December 31, 2025.
• The SEC terminated its investigation or enforcement action into the Zcash Foundation in January 2026.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a mixed filing. While the underlying ZEC asset experienced substantial price appreciation, leading to significant net asset growth for the Trust, the persistent trading discount of the Shares to NAV indicates a fundamental challenge in meeting its investment objective. The ongoing efforts to convert to an ETF and enable redemptions are positive catalysts, but their success and timing remain uncertain.

Positives

• Net assets increased by 809% to $200,441,000 as of December 31, 2025, demonstrating significant growth in the Trust's holdings.
• The price of ZEC experienced substantial appreciation, rising from $56.12 per ZEC at the end of 2024 to $509.35 per ZEC at the end of 2025.
• The Trust reported a net realized and unrealized gain on investment of $179,067,000 for the year ended December 31, 2025.
• The SEC terminated its investigation or enforcement action into the Zcash Foundation in January 2026, reducing regulatory uncertainty for the underlying asset.
• The Trust has filed a registration statement for a proposed public offering and NYSE Arca listing, with plans to introduce an ongoing redemption program, which could improve price tracking and liquidity.
• Robust security measures are in place for ZEC custody, including offline storage (cold storage), multiple encrypted private key shards, geographic distribution of vaults, and 2-step verification.
• Coinbase Custody Trust Company, LLC, the Custodian, is a fiduciary under New York Banking Law and a qualified custodian, providing a high standard of asset safeguarding.

Negatives

• Shares have historically traded at a substantial discount to the Trust's Net Asset Value (NAV), reaching a 24% discount as of December 31, 2025.
• The absence of an ongoing redemption program prevents arbitrage mechanisms from keeping the value of the Shares closely linked to the Index Price.
• Shareholders have limited voting rights and restricted ability to bring derivative actions, requiring two or more non-affiliated shareholders collectively holding at least 10.0% of outstanding Shares.
• The Trust is a passive investment vehicle and is not actively managed to mitigate the impacts of ZEC price volatility.
• Potential conflicts of interest exist due to the Sponsor and its affiliates (e.g., Grayscale Securities as the sole Authorized Participant) having intertwined interests with the Trust.
• The Sponsor's indirect parent company, DCG, holds a minority interest in Kraken, one of the Digital Asset Trading Platforms included in the Index, which could raise concerns about market data influence.
• The amount of ZEC represented by each Share will gradually decrease over time due to the payment of the Sponsors Fee and any Additional Trust Expenses in ZEC.
• ZEC transactions are irrevocable, and stolen or incorrectly transferred ZEC may be irretrievable, posing a risk of permanent loss.
• The Custodian's liability for ZEC losses is capped, and the Trust cannot be assured of adequate insurance coverage for all potential losses.
• The Trust has not met its investment objective for the Shares to reflect the value of ZEC held by the Trust, less expenses and other liabilities.

Risks

• Extreme volatility of ZEC trading prices could lead to a material adverse effect on the value of the Shares, potentially resulting in a loss of all or substantially all of their value.
• The medium-to-long term value of the Shares is subject to factors related to the early stage of blockchain technologies, dependence on the internet, and potential for malicious activity.
• Loss of access to a private key required to access ZEC may be irreversible, leading to permanent loss of assets.
• Digital asset mining operations consume significant electricity, which may lead to negative public opinion or government regulations restricting mining activities, impacting the Zcash Network.
• The Zcash Network faces significant scaling challenges, and efforts to increase transaction speed and throughput may not be successful, potentially increasing transaction fees and reducing demand for ZEC.
• The open-source nature of the Zcash Network protocol means developers may lack financial incentives or resources to maintain and develop the network, potentially damaging it.
• The cryptography (zk-SNARKs) used for privacy on the Zcash Network is new and could fail, or become ineffective due to advances in technology like quantum computing, compromising security.
• ZEC is only selectively accepted as a means of payment, and banks may refuse services to ZEC-related businesses, dampening liquidity and public perception.
• Concentrated ownership of ZEC, including potentially hidden shielded holdings, could lead to adverse price effects from large sales or distributions.
• Insufficient mining rewards or regulatory restrictions on mining could lead miners to cease operations, compromising the security of the Zcash Blockchain.
• A malicious actor or botnet obtaining control of more than 50% of the processing power on the Zcash Network could manipulate the blockchain, adversely affecting ZEC value.
• Temporary or permanent forks or clones of the Zcash Network could adversely affect the value of the Shares, and the Sponsor's choice of which fork to support may not be the most valuable.
• Name changes and rebranding initiatives for ZEC may not be favorably received by the digital asset community, negatively impacting ZEC value.
• Privacy-preserving features of ZEC could facilitate illicit activities, increasing regulatory scrutiny, potential criminal/civil lawsuits, and delisting from trading platforms (e.g., past delistings and Binance's monitoring tag).
• Digital Asset Trading Platforms, due to their largely unregulated nature, may experience fraud, market manipulation (front-running, wash-trading), business failures, security failures, or operational problems.
• The Index, used for ZEC valuation, has a limited history and its methodology may change, potentially affecting the accuracy of ZEC price tracking and investor confidence.
• Purchasing activity for Basket creations may increase the market price of ZEC, leading to higher Share prices, which may then decline after creation.
• Competition from other digital assets (e.g., XMR, DASH, ROSE, tokenized assets, CBDCs) could negatively impact demand for ZEC and the value of the Shares.
• Congestion or delays on the Zcash Network may delay purchases or sales of ZEC by the Trust, affecting liquidity and confidence.
• SEC approval of generic listing standards for commodity-based trust shares and other digital asset ETPs could reduce demand for ZEC.
• Prices of ZEC may be affected by stablecoins (e.g., Tether, USDC), their activities, and regulatory treatment, potentially causing market volatility.
• The Trust relies on third-party service providers (Custodian, Authorized Participant); disruptions or replacements could pose challenges to safekeeping ZEC and Trust operations.
• The legal rights of customers regarding digital assets held by third-party custodians in insolvency proceedings are uncertain, potentially exposing the Trust to loss of assets.
• As an emerging growth company, the Trust's reduced disclosure requirements may make the Shares less attractive to some investors.
• The lack of an ongoing redemption program and Rule 144 holding periods mean there is no arbitrage mechanism to keep Share value closely linked to the Index Price, leading to substantial premiums or discounts.
• The Shares may trade at a price that deviates from NAV due to non-concurrent trading hours between OTCQX and the 24-hour Digital Asset Trading Platform Market.
• The amount of the Trust's assets represented by each Share will decline over time as the Trust pays the Sponsors Fee and Additional Trust Expenses.
• The value of the Shares may be influenced by factors unrelated to the value of ZEC, such as operational problems, security vulnerabilities, or service provider terminations.
• Shareholders do not have the protections associated with ownership in an investment company registered under the Investment Company Act or a CEA-regulated commodity pool.
• The Trust may be required, or the Sponsor may deem it appropriate, to terminate and liquidate at a time disadvantageous to shareholders.
• The Trust Agreement limits shareholders' voting rights and restricts their right to bring a derivative action, requiring a 10% ownership threshold from non-affiliated shareholders.
• The Sponsor is solely responsible for determining NAV and NAV per Share, and any errors or changes in valuation calculations could adversely affect Share value.
• Extraordinary expenses, not covered by the Sponsor's fee, may become payable by the Trust, requiring ZEC sales and potentially causing tax liability for shareholders without an associated distribution.
• The Trust may be required to indemnify the Sponsor, Trustee, Transfer Agent, or Custodian, which could reduce the NAV and Share value.
• Intellectual property rights claims could adversely affect the Trust's operations and Share value.
• Pandemics, epidemics, and other natural/man-made disasters could negatively impact ZEC demand or disrupt Trust affairs.
• Shareholders may not receive the benefits of any forks or airdrops due to operational, tax, securities law, regulatory, legal, and practical issues.
• The Sponsor may implement Trust Agreement amendments that do not align with shareholder interests or increase tax risk.
• A determination that ZEC is a security could adversely affect its value, lead to Trust termination, or require the Trust to register as an investment company.
• Regulatory changes or actions by U.S. Congress or federal/state agencies (e.g., FinCEN, OFAC, SEC, CFTC, IRS) may affect ZEC value or restrict its use and mining activity.
• Law enforcement agencies' reliance on blockchain transparency conflicts with ZEC's privacy features, potentially increasing scrutiny and compliance burdens.
• Competing industries may have more influence with policymakers than the digital asset industry, leading to regulations harmful to digital assets.
• Regulatory changes or other events in foreign jurisdictions (e.g., China, South Korea, UK, EU MiCA) may negatively impact ZEC acceptance and value.
• If regulators or public utilities restrict mining activities, it could significantly decline, adversely affecting the Zcash Network and Share value.
• Regulation of an Authorized Participant, the Trust, or the Sponsor as a money service business or money transmitter could result in extraordinary expenses and decreased liquidity.
• Statutory or regulatory changes could obligate the Trust or Sponsor to register and comply with new regulations, leading to extraordinary, nonrecurring expenses.
• The U.S. federal income tax treatment of the Trust and digital assets is uncertain, and future guidance could have adverse tax consequences for shareholders.
• U.S. tax-exempt shareholders may recognize unrelated business taxable income (UBTI) from forks, airdrops, or similar occurrences.
• Non-U.S. Holders may be subject to U.S. federal withholding tax on income derived from forks, airdrops, and similar occurrences.
• Potential conflicts of interest may arise among the Sponsor or its affiliates and the Trust, potentially favoring their own interests.
• The Sponsor and the Trust's sole Authorized Participant are affiliated, meaning Basket creation transactions are not arms-length.
• Shareholders cannot be assured of the Sponsor's continued services; discontinuance without a suitable replacement could lead to Trust termination.
• If the Custodian resigns or is removed without replacement, it would trigger early termination of the Trust.
• Lack of independent advisers representing investors in the Trust may lead to undesirable investment decisions.

Future Outlook

The Trust has filed a registration statement on Form S-3 for a proposed public offering and NYSE Arca listing under the ticker symbol ZCSH. Upon the effectiveness of this registration and NYSE Arca listing, the Sponsor plans to rename the Trust as Grayscale Zcash Trust ETF and implement structural and operational changes, including the commencement of an ongoing redemption program. There is no assurance that the SEC will declare the registration statement effective or that NYSE Arca will approve the listing. The Sponsor intends to evaluate each Zcash Network fork, airdrop, or similar occurrence on a case-by-case basis. The Electric Coin Company has announced its intention to support a shift from Proof-of-Work to Proof-of-Stake for the Zcash Network, projected to take approximately three years, but this transition had not yet occurred as of December 31, 2025.

Management Comments

• The Sponsor believes that investors will be able to more effectively implement strategic and tactical asset allocation strategies that use ZEC by using the Shares instead of directly purchasing and holding ZEC, and for many investors, transaction costs related to the Shares will be lower than those associated with the direct purchase, storage and safekeeping of ZEC.
• The Sponsor believes the quotation of the Shares on OTCQX provides investors with an efficient means to implement various investment strategies.
• The Sponsor believes the Index Provider's selection process for Constituent Trading Platforms as well as the methodology of the Index Price's algorithm provides a more accurate picture of ZEC price movements than a simple average of Digital Asset Trading Platform spot prices, and that the weighting of ZEC prices on the Constituent Trading Platforms limits the inclusion of data that is influenced by temporary price dislocations that may result from technical problems, limited liquidity or fraudulent activity elsewhere in the ZEC spot market.
• The Sponsor intends to evaluate each fork, airdrop or similar occurrence on a case-by-case basis in consultation with the Trust's legal advisers, tax consultants, and Custodian, and may decide to abandon any Incidental Rights or IR Virtual Currency resulting from a hard fork, airdrop or similar occurrence should the Sponsor conclude, in its discretion, that such abandonment is in the best interests of the Trust.
• The Sponsor believes this lawsuit [Genesis Capital vs. DCG] is without merit and intends to vigorously defend against it.
• The Sponsor does not expect the foregoing proceedings to have a material adverse effect on the Trust's business, financial condition or results of operations.
• The Sponsor believes there are currently no risks from any potential cybersecurity threat or cybersecurity incident that are reasonably likely to have a material effect on our results of operations or financial condition.

Industry Context

StockSavvy.ai notes that the digital asset market experienced extreme volatility and disruption in recent periods, including the insolvencies of Celsius, Voyager, and Three Arrows Capital in the first half of 2022, and the FTX bankruptcy in November 2022. These events led to increased regulatory scrutiny and enforcement actions, such as the SEC's charges against Binance, Coinbase, and Kraken (though later dismissed). The failures of crypto-friendly banks like Silicon Valley Bank, Signature Bank, and Silvergate Bank in March 2023 also impacted banking services for digital asset participants. Regulatory efforts, including President Trump's executive order in January 2025 and the GENIUS Act in July 2025, indicate a push towards a clearer, but potentially more restrictive, regulatory framework for digital assets and stablecoins in the U.S. The Zcash Network's privacy features, while a differentiator, have led to delisting from some exchanges and increased regulatory scrutiny, contrasting with the broader trend of increasing transparency in traditional finance. The proposed shift from Proof-of-Work to Proof-of-Stake for Zcash aligns with broader industry trends towards more energy-efficient consensus mechanisms, but its implementation timeline is uncertain.

Comparison to Industry Standards

• The Zcash Network's transaction capacity of approximately 5 transactions per second is significantly lower than more established networks like Bitcoin, although Zcash Network average daily transaction fees ($0.31 on December 31, 2025) are generally lower than Bitcoin's ($0.65 on December 31, 2025).
• ZEC was the 15th largest digital asset by market capitalization as of December 31, 2025, indicating a smaller market presence compared to leaders like Bitcoin and Ether.
• Direct competitors in the privacy-enabling digital asset space include Monero (XMR), Dash (DASH), and Rose (ROSE).
• The Custodian, Coinbase Custody Trust Company, LLC, operates as a fiduciary under New York Banking Law and a qualified custodian, which represents a high standard of regulatory compliance and asset safeguarding within the digital asset custody industry.
• The Trust's 2.5% annual Sponsors Fee is comparable to other Grayscale products but may be higher than fees for some spot ETFs in traditional asset classes.
• The historical trading of Shares at a substantial premium or discount to NAV (maximum premium 240%, maximum discount 55%, average discount 20% from October 2021 to December 2025) deviates significantly from the tight tracking typically expected of well-functioning exchange-traded products for traditional assets.

Management Changes

Corporate Governance

Legal Proceedings

• On May 19, 2025, Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd. filed a complaint in the SDNY Bankruptcy Court against Digital Currency Group, Inc. (DCG) and certain affiliates, including Grayscale Operating, LLC (former Co-Sponsor), alleging preferential transfers of 105 Bitcoin and 37,647.06 Ethereum Classic tokens. Grayscale Operating, LLC believes this lawsuit is without merit and intends to vigorously defend against it.
• On January 17, 2025, DCG agreed to a cease-and-desist order and payment of a $38 million civil money penalty arising out of the SEC's allegations that DCG negligently misled investors about Genesis Capital's financial condition and created a materially false impression regarding its financial health.
• The SEC terminated its investigation or enforcement action into the Zcash Foundation in January 2026.

Related Party Transactions

• Grayscale Investments Sponsors, LLC (Sponsor) is a consolidated subsidiary of Digital Currency Group, Inc. (DCG).
• Grayscale Securities, LLC, the sole Authorized Participant, distributor, and marketer for the Shares, is an affiliate of the Sponsor and a wholly owned subsidiary of DCG.
• DCG holds a minority interest of less than 1.0% in Kraken, one of the Digital Asset Trading Platforms included in the Index.
• DCG and certain of its subsidiaries, including Grayscale Securities, LLC, collectively hold 10.78% of the Trust's Shares as of March 6, 2026.
• DCG purchased $2.0 million worth of Shares between March 2, 2022, and June 30, 2022, under a $10 million authorization, with $8.0 million remaining available for future purchases.
• The Trust pays the Sponsor an annual fee of 2.5% of its NAV Fee Basis Amount, paid in ZEC.
• The Sponsor is indemnified by the Trust for certain liabilities or expenses incurred without gross negligence, bad faith, or willful misconduct.
• Officers of the Sponsor may trade ZEC for their personal trading accounts, subject to internal policies and procedures.

Stakeholder Impact

• Shareholders: Experienced significant appreciation in the underlying ZEC asset value, but also a substantial trading discount to NAV. They have limited voting rights and restricted derivative action rights. Potential for tax liability without associated distributions from ZEC sales to cover expenses. Potential for increased liquidity and reduced premium/discount if the proposed ETF conversion and redemption program are approved.
• Sponsor (Grayscale Investments Sponsors, LLC): Benefits from the 2.5% annual Sponsors Fee. Faces potential conflicts of interest due to its affiliations with other entities in the digital asset ecosystem and its role in managing the Trust.
• Custodian (Coinbase Custody Trust Company, LLC): Provides secure custody services for the Trust's ZEC, subject to contractual liability limits and regulatory oversight.
• Authorized Participants (Grayscale Securities, LLC): As the sole Authorized Participant, it facilitates the creation of Shares, benefiting from its role, but also subject to conflicts of interest due to its affiliation with the Sponsor.
• Zcash Network Community: The network's future development, including a potential shift to Proof-of-Stake, and its privacy features are subject to community consensus and regulatory scrutiny, which could impact user adoption and ZEC value.

Next Steps

• The SEC needs to declare the registration statement on Form S-3 effective for the proposed public offering.
• NYSE Arca needs to approve the listing of the Trust's Shares under the ticker symbol ZCSH.
• Upon listing and regulatory approval, the Sponsor plans to rename the Trust as Grayscale Zcash Trust ETF and implement an ongoing redemption program.
• The Sponsor will continue to evaluate each future Zcash Network fork, airdrop, or similar occurrence on a case-by-case basis.
• The Zcash Network is projected to transition from a Proof-of-Work to a Proof-of-Stake consensus mechanism, with an estimated three-year implementation timeline.

Key Dates

Recommendation

The Trust demonstrated strong asset growth in 2025 due to ZEC's price appreciation, and the dismissal of SEC actions against major exchanges and the Zcash Foundation reduces regulatory uncertainty. However, the persistent trading discount to NAV and the lack of an active redemption program remain significant drawbacks. While the proposed ETF conversion could address these issues, its approval and implementation are not guaranteed. Investors should hold to see if the ETF conversion materializes, which could unlock value by narrowing the discount, but new investment should await clearer regulatory and operational certainty.

Keywords

Zcash, ZEC, Grayscale, Digital Asset, Cryptocurrency, Trust, SEC Filing, 10-K, Financial Report, Investment, Blockchain, OTCQX, ZCSH, Crypto ETF, Digital Currency Group, Zk-SNARKs, Privacy Coin, Coinbase Custody, Regulation M, Rule 144, Grantor Trust, Zcash Network, Mining, Hard Fork, Airdrop, Stablecoins, Market Volatility, Regulatory Risk, Cybersecurity