Arthur Hayes Pushes Zcash Towards 'Shield': Halving and Regulatory Risks in Focus

Former BitMEX CEO Arthur Hayes recently urged Zcash holders to withdraw coins from centralised exchanges and move them to shielded addresses, known as shielded addresses.

The move, he explained, is strategic to reduce the balances available for trading and take advantage of the lower probability of short-term spending of shielded coins. Hayes also revealed that ZEC is now its second largest position, just behind Bitcoin.

This indication comes at a crucial time: Zcash is going through its third halving this month, reducing issuance per block from 3.125 to 1.5625 ZEC, an immediate 50 per cent cut in the new offering.

If you hold ZECs on a CEX, withdraw them on a self-custodial wallet and shield them (shield it)," he said Arthur on X

The daily issue will drop from about 3,600 to 1,800 ZEC. Hayes' appeal acts on the existing supply side, shifting immediately tradable cash to personal custody and then into shielded pools, where turnover is typically lower.

Float Shrinkage and Regulatory Risks

The amount of ZECs in shielded pools has exceeded 4.5-5.0 million ZECs, or about 27-30% of the circulating supply. A recent peak saw around 1 million shielded ZECs in a short window.

This trend supports the notion that the practice of shielding can alter the microstructure of the market, reducing the tradable float, which can affect depth, slippage and cost base in the context of halving issuance.

The design of Zcash with 'optional privacy' is central, allowing for both transparent and shielded activity. However, the tightened regulation poses a risk to its listability.

The European Union's Anti-Money Laundering Regulation (AMLR), due to be implemented on 1 July 2027, and the Financial Action Task Force's (FATF) 2025 update on the Travel Rule aim for tighter controls on privacy coins and stream metadata, influencing exchange policies.

The 2025 Binance episode, which raised a vote of delisting for ZEC (though later not implemented), has already demonstrated the fragility of liquidity and market access.

In the near future, the interplay between halving (which reduces supply) and the privacy push (which reduces the float available) is expected to keep volatility high.

A potential pre-emptive restriction by European exchanges ahead of AMLR or a privacy 'flywheel' in which the Hayes instruction becomes the norm, reducing the float faster than issuance can replenish, are the main scenarios for ZEC's post-halving market.