Confidential blockchain protocol Zama is expected launch the first decentralized finance (DeFi) yield product for Confidential USDC (cUSDC) on June 23, allowing users to earn yield on encrypted stablecoin deposits through a partnership with Morpho and SteakhouseFi.
According to a detailed X post, the new Steakhouse Confidential USDC Prime vault extends the use of Zama’s Fully Homomorphic Encryption (FHE)-powered confidential token infrastructure beyond transfers and storage into lending markets. Deposits will be routed through Morpho’s lending protocol while keeping users’ balances and positions encrypted on Ethereum.
The launch introduces confidential yield generation for stablecoins on Ethereum, aiming to make decentralized finance more suitable for institutional participants concerned about onchain transparency.
How the confidential vault works
Unlike conventional DeFi lending, where wallet balances, deposit amounts, and transaction timing are publicly visible, the new vault enables users to deposit Confidential USDC without exposing those details onchain.
Users first convert standard USDC into cUSDC through the Zama application before depositing into the Steakhouse Confidential USDC Prime vault. The funds are then allocated to the existing Steakhouse Prime v2 strategy on Morpho.
According to Zama, the vault uses the same lending strategy, collateral selection, and risk parameters as Steakhouse’s flagship USDC Prime vault. The primary difference is that deposited assets remain encrypted throughout the process.
Why Zama chose Morpho
Rather than creating a separate lending protocol, Zama integrates confidentiality into the infrastructure already operating on Ethereum. The vault will continue generating yield through Morpho’s lending markets backed by blue-chip collateral, including cbBTC, WBTC, and wstETH, while SteakhouseFi continues to manage credit allocation.
Because the underlying investment strategy remains unchanged, users receive exposure to the same yield model available in the standard USDC Prime vault while adding transaction privacy.
The launch also comes as Morpho continues to attract stablecoin-focused treasury products across the industry. In May 2036, USDT-native Layer-1 blockchain Stable introduced StableEarn, a treasury management product that uses Morpho’s lending framework to generate yield on USDT holdings.
The first vault, curated by Gauntlet and backed by Theo’s real-world asset (RWA) strategies, routes deposits into products supported by tokenized assets and regulated investment frameworks. The rollout reflects a broader trend of protocols using Morpho’s infrastructure to offer yield-generating products tailored to institutional and treasury users.
Why institutions demand drives private DeFi
The companies said institutional demand for confidential blockchain transactions was a key reason behind the launch. Merlin Egalite, co-founder of Morpho, said institutional participants have consistently requested greater operational privacy when allocating capital onchain.
He added, “One thing we keep hearing from institutions is the demand for confidentiality onchain. Zama’s stack on Morpho lets them allocate into vaults without compromising operational privacy.”
SteakhouseFi co-founder Sébastien Derivaux added that confidential deposits allow institutions to access existing USDC yield strategies without publicly revealing position sizes, while maintaining compliance and auditability.
For institutional investors deploying significant capital, public visibility of wallet balances and investment timing can reveal trading strategies and expose firms to competitive risks.
Launch follows cUSDC contract freeze
The launch comes weeks after Zama resolved a legal dispute that temporarily froze its Confidential USDC contract. On June 1, founder Rand Hindi said a U.S. federal court lifted a temporary restraining order (TRO), restoring access to approximately $12.5 million in USDC that had been locked since May 29.
According to Zama, the freeze stemmed from a civil lawsuit involving a third-party project after a wallet linked to the case had previously deposited roughly $12.5 million into the cUSDC wrapper contract. Because the asset was newly launched, that single deposit represented more than 99% of the contract’s value. Zama said the court later determined the freeze was unwarranted, allowing the protocol to resume normal operations.
What comes next for confidential USDC
Confidential USDC has been available on Ethereum for holding and transferring funds privately, but the launch marks its first integration into a DeFi yield product. Zama said the initiative demonstrates how confidential assets can be incorporated into existing decentralized finance infrastructure instead of requiring entirely new protocols.
The company believes the model could eventually be extended to additional lending products and financial applications built on Ethereum.
The Steakhouse Confidential USDC Prime vault will begin accepting deposits on June 23. Ahead of the launch, Zama is running a shielding campaign through June 22 that allows users to convert USDC into cUSDC. Eligible participants will receive entries into an onchain prize draw that will distribute $25,000 worth of cUSDC among 25 winners.
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