Grayscale has submitted a filing to the U.S. Securities and Exchange Commission for the ZCSH High Income ETF. The proposed fund aims to distribute payments to shareholders every two weeks. According to the document filed on September 25, the product could potentially take effect within 75 days, targeting an early December launch.
Unlike standard spot funds, the new ETF will not hold the Zcash cryptocurrency directly. Instead, it will trade options linked to the existing Grayscale Zcash ETF. The strategy involves selling short-dated call options to generate premiums, which will then be used to fund the biweekly payouts to investors.
The filing mandates that at least 80% of the fund's net assets must be invested in options tied to Zcash exchange-traded products. However, Grayscale notes that the high-income label does not guarantee a specific yield, and some distributions may effectively return a portion of the investor's own capital.
The fund faces potential risks, as selling call options limits upside potential if the price of ZEC rises above the strike price, while the fund remains exposed to full downside risk. Additionally, Grayscale acknowledged a conflict of interest, as the fund's adviser is affiliated with the sponsor of the underlying ZCSH fund.
The underlying ZCSH fund has seen significant growth, with assets reaching $914,5 million by the week ending September 18, following cumulative inflows of $271 million. Grayscale currently manages a similar covered call ETF for Bitcoin, and other firms like Goldman Sachs have also explored premium income products.
