ZCASH SECURITIES INVESTIGATION CLOSED WITHOUT ENFORCEMENT ACTION

The U.S. Securities and Exchange Commission (SEC) has concluded a two-year investigation into the Zcash Foundation (ZEC) without recommending enforcement action, removing a regulatory overhang.

This decision is part of a broader shift in U.S. crypto enforcement policy under the Trump administration, which has dismissed or paused over 60% of active crypto-related cases.

The resolution of the SEC investigation has led to a price rally for ZEC, with the token trading up over 12% in 24 hours.

The SEC's decision to close its investigation into Zcash was influenced by the project's non-profit structure and transparent governance, differentiating it from other projects under regulatory scrutiny. The investigation, which began in August 2023, examined whether Zcash's funding, governance, or token distribution could be considered an unregistered securities offering. The SEC concluded that Zcash did not violate compliance requirements and that . This outcome is seen as a win for privacy-focused projects, potentially setting a precedent for future projects seeking to balance privacy with regulatory expectations. The decision is expected to allow the Zcash Foundation to focus on development while reassuring exchanges and developers that Zcash is not in violation of U.S. securities law.

Despite the regulatory clarity provided by the SEC, Zcash faces internal governance challenges that continue to weigh on the project. The core development team at Electric Coin Company (ECC) resigned due to governance disputes with Bootstrap, forming a new entity, cashZ. This leadership turmoil has led to a 25% drop in ZEC's value over the following days.

What Is the Impact of the SEC's Decision on Zcash's Future?

The SEC's decision to close its investigation into Zcash provides regulatory clarity for privacy-focused projects and reduces the risk of delisting or bans on exchanges. This outcome is seen as a win for privacy-focused projects, potentially setting a precedent for future projects seeking to balance privacy with regulatory expectations. The decision is expected to allow the Zcash Foundation to focus on development while reassuring exchanges and developers that Zcash is not in violation of U.S. securities law.

However, the internal governance challenges persist. The resignation of the core development team at ECC has raised questions about the long-term sustainability and direction of the Zcash project. The formation of a new development entity, cashZ, highlights structural issues within foundation-backed governance models. These challenges could affect investor confidence and the project's ability to maintain its position in the market.

How Does Zcash Compare to Other Privacy Coins in the Regulatory Landscape?

Zcash is positioned as a privacy-focused Bitcoin alternative with a 21M supply cap and selective transaction shielding via zero-knowledge proofs (zk-SNARKs). The project's selective disclosure feature provides an edge over Monero, which offers full anonymity. This distinction is crucial under EU MiCA rules, which target privacy coins while favoring projects with compliant privacy models.

Monero (XMR), another privacy-focused asset, has regained prominence in recent trading, reclaiming the top position among privacy coins by market capitalization. The regulatory environment remains challenging for privacy coins, with potential bans looming under EU regulations. Zcash's recent price drop and loss of top spot to Monero raise concerns about its governance and long-term viability.

What Are the Broader Implications for the Crypto Industry?

The SEC's decision to close its investigation into Zcash reflects a broader regulatory shift under the Trump administration, which has shown a pattern of scaling back or dismissing high-profile enforcement actions. This pattern includes the withdrawal of the civil lawsuit against Binance and the reduction of enforcement actions involving other major firms. The decision is seen as a positive step for Zcash, potentially bolstering its position as a compliant privacy coin in a regulatory tightening environment.

The regulatory landscape is still evolving, with the EU's MiCA rules targeting privacy coins and favoring projects with compliant privacy models. Zcash's selective disclosure feature is its potential lifeline under these rules, giving it an edge over Monero. The competitive battlefield is volatile, with Monero dominating the market cap and facing potential regulatory bans. Zcash's recent price drop and loss of top spot to Monero raise concerns about its governance and long-term viability.

• The resolution of the SEC investigation allows the Zcash Foundation to focus on development while reassuring exchanges and developers that Zcash is not in violation of U.S. securities law.
• The Zcash Community Grants (ZCG) committee has taken steps to strengthen the project's ecosystem by supporting initiatives focused on infrastructure, payments, and developer tooling.
• The SEC did not publicly comment on the matter, but the Zcash Foundation stated it had received formal confirmation of the review's conclusion.