- Grayscale seeks SEC approval for a pioneering privacy-centered ETF, diversifying its portfolio amid GBTC outflows.
- The proposed ETF will target companies in the privacy technology sector, with plans to include a 10% allocation to ZCash.
In an ambitious move to broaden its product offerings, Grayscale Investments, a leading asset management firm, has announced its plans to venture into the realm of privacy-centered exchange-traded funds (ETFs).
This decision comes at a critical juncture, as the firm seeks approval from the United States Securities and Exchange Commission (SEC) for its new application, signaling a strategic pivot towards catering to the burgeoning demand for privacy and cybersecurity investments.
A New Era of Privacy-Focused Investment
Grayscale’s proposed ETF marks a significant foray into a niche yet increasingly vital sector. Amidst noticeable outflows from its flagship Bitcoin Trust (GBTC), the firm is evidently diversifying its exchange-traded product (ETP) portfolio.
The new ETF, intended to be index-based, aims to meticulously track the performance of companies engaged in five critical sub-themes of the data privacy sector: data service solutions, blockchain-based privacy solutions, cyber service providers, network and communication security providers, and privacy-preserving protocols.
The eligibility criteria for companies to be included in this pioneering ETF are stringent. Firms must derive at least 50% of their revenue from the aforementioned sub-themes and meet several operational and financial thresholds, including a minimum market capitalization of $250 million.
These companies must also be publicly traded in the United States or in recognized stock exchanges of developed or emerging markets, ensuring a broad and diversified investment base.
Should the SEC greenlight Grayscale’s application, the firm will set a precedent as the first asset manager to specifically target the emerging sector of privacy technology and cybersecurity.
This initiative is not just a strategic move to diversify its product lineup but also a reflection of Grayscale’s commitment to promoting privacy and security in the digital age.
The Role of ZCash in Grayscale’s Privacy ETF
Integral to realizing this vision, Grayscale plans to allocate a portion of the ETF funds to the Grayscale ZCash Trust (ZCSH), which invests in ZCash (ZEC), a cryptocurrency designed for private transactions.
At the time of writing, the price of ZEC has risen 2.38% in the last 24 hours, reaching a price of $26.38. This represents an increase of 16.20% over the past 7 days.
That allocation underscores the importance of privacy cryptocurrencies in offering users the discretion to keep their financial transactions confidential, despite the controversies surrounding their potential for illicit use. In the YouTube video below, you can dive deeper into this latest development.
Strategy to Counterbalance GBTC Outflows
The launch of the privacy-centered ETF is perceived as a tactical maneuver by Grayscale to mitigate the significant outflows from its GBTC fund. By diversifying into new investment products, Grayscale aims to alleviate the pressure on GBTC, reflecting a broader trend of asset managers adapting to market demands for specialized investment themes.
Beyond the privacy-centered ETF, Grayscale continues to expand its suite of investment products, offering private placement subscriptions for a selection of cryptocurrency trusts to accredited investors. This expansion includes trusts for Bitcoin Cash, Chainlink, Litecoin, Solana, and Stellar Lumens, further democratizing access to cryptocurrency investments.