Add butter and cream cheese to the bowl of an electric mixer. Beat on medium speed for about 2 minutes until smooth. Scrape down bowl. Add the sugar and beat to combine. Add the zest and vanilla, mix until zest is evenly incorporated, maybe 60 seconds. Scrape down the bowl. Turn the mixer to the lowest setting. Slowly add the flour. Once it is nearly all incorporated at the cocoa nibs. You may need to work the dough together by hand to get all the dry bits mixed in.

Work the dough into a log and wrap with plastic wrap or wax paper. Chill for 2 hours or overnight.

Preheat oven to 350 degrees. Line 2 cookie sheets with parchment paper.

Remove the dough from the refrigerator. Working quickly, use a pastry brush to coat the outside with the beaten egg (you will not use all of the egg). Cover the egg wash with a coat of coarse sugar. With a sharp knife, cut the dough into ½” thick slices. Place on prepared cookie sheet spaced about 1 inch apart.

Bake in preheated oven for 13-15 minutes until edges begin to turn golden. Remove from oven. Cool on cookie sheet for 2 minutes, then remove to wire rack to cool completely.