Grayscale says crypto ETF market is entering new phase as Zcash ETF tops $1 billion

The crypto ETF market is entering a new phase as issuers move beyond bitcoin and ether and become more selective about which digital assets can support investment products, according to Grayscale's head of trading and capital markets.

Grayscale Managing Director Krista Lynch said the U.S. Securities and Exchange Commission's generic listing standards have created a framework covering roughly 15 tokens, giving issuers more room to choose products based on investor demand and their own conviction. In January, Grayscale said it had 27 assets under consideration across AI, DeFi, consumer and infrastructure categories.

That selectivity is already playing out in the market. Grayscale's Zcash ETF (ZCSH) gathered more than $1 billion in its first 30 trading days, Lynch said, putting it among the top 1% of ETFs launched over the past decade by assets gathered in their first month.

"As measured by assets gathered in the first month of its existence as an ETF, the Zcash ETF is in the top 1% of ETFs launched in the past decade," Lynch told The Starting Block at Token2049 Singapore.

Lynch runs the desk that sources or sells the underlying token on every creation and redemption across Grayscale's ETF franchise, a role she said has grown into business development and investor education.

"Here at Token2049, everyone is very in the crypto bubble, but a lot of our conversations are, 'What is Bitcoin? What is Ethereum?'" she said. "You've got to start simple."

While the ETF market expands, Lynch said Grayscale is also looking beyond the traditional fund structure. The firm filed last week to tokenize two of its 1940 Act products, a bitcoin covered-call fund and an ether covered-call fund, after the SEC introduced an innovation exemption that Lynch described as a "consolation prize" following the failure of the Clarity Act.

"Of course, we're upset or disappointed that Clarity didn't pass, but the fact that we've gotten over the milestone of it not passing has in some ways given more clarity, because it's not a question mark," Lynch said.

Lynch said the SEC's exemption nevertheless provides a path for the industry to make progress on tokenization. Last month, Grayscale was among several crypto firms to urge the SEC to speed ETF reviews and allow confidential draft filings.