Zama, Morpho launch confidential USDC yield product

Zama has partnered with Morpho and Steakhouse Financial to launch a confidential yield product for USDC holders on Ethereum. The companies describe it as the first confidential USDC lending product of its kind on the network.

The product gives institutions and corporate treasuries a way to earn yield on stablecoin holdings without exposing balances, transactions or allocation strategies on a public blockchain. It is built around Steakhouse's Prime USDC vault on Morpho, with Zama providing the encryption layer.

On public blockchains, wallet balances and transaction flows are visible in real time, limiting their appeal for some larger investors and treasury teams. In decentralised finance, that transparency can expose trading and lending positions to competitors and raise concerns about front-running and disclosure of investment strategy.

Users first convert standard USDC into a confidential version, known as cUSDC, before depositing it into the Steakhouse vault on Morpho. The process uses Fully Homomorphic Encryption, a cryptographic method designed to keep data private while still allowing it to be processed.

The arrangement keeps activity on Ethereum rather than moving funds to another blockchain. According to Zama, the confidential version of the stablecoin also includes auditability of the shielded supply and compliance features.

Institutional demand

The launch comes as stablecoins draw growing attention from treasury departments, asset managers and payments groups exploring onchain financial products. But concerns over operational privacy remain a barrier, particularly for organisations unwilling to reveal cash positions or portfolio moves in public.

That issue has become more pressing as decentralised lending markets expand and more mainstream financial groups explore blockchain-based settlement and liquidity management. Morpho said institutions have repeatedly asked for greater confidentiality when allocating capital onchain.

“Until now, operating on a public blockchain meant exposing your entire financial playbook to your competitors,” said Dr. Rand Hindi, Co-founder and Chief Executive Officer of Zama. “By bringing Fully Homomorphic Encryption (FHE) to core financial primitives like lending vaults, we are proving that privacy and decentralization are no longer mutually exclusive. This partnership with Morpho and Steakhouse Financial marks the official launch of the Confidential DeFi category on Ethereum, an essential paradigm shift that will finally allow institutional capital to move fully onchain.”

Morpho runs a decentralised lending protocol that connects lenders and borrowers through onchain vaults. Steakhouse manages the Prime USDC vault used for the new confidential product, which it describes as liquid and focused on risk control.

Under the structure, holders of cUSDC can deposit into the existing Morpho vault framework and receive yield while keeping the size of their position private. Zama said the deposits use the same underlying vault infrastructure rather than a separate system built only for confidential assets.

“One thing that we keep hearing from institutions is the demand for confidentiality onchain,” said Merlin Egalite, Co-founder of Morpho. “Zama's confidentiality stack built on top of Morpho allows institutions to allocate into Morpho Vaults just like any allocation onchain without compromising operational privacy.”

Privacy focus

The partnership reflects a broader effort in digital asset markets to add privacy tools to products that have typically prioritised transparency. Supporters argue that full visibility may suit open networks, but it can deter corporate finance teams that need discretion over treasury strategy and cash management.

Steakhouse said the product is aimed at those users, especially allocators and corporate treasuries seeking stablecoin returns without making positions visible to rivals. The firm also framed the launch as part of a wider shift towards stablecoin-based financial products.

“The economy is stablecoinizing fast. Allocators and corporate treasuries are increasingly looking to access stablecoin-based financial products. For many, the challenge is visibility: public blockchains expose balances and flows to competitors and front-runners. Steakhouse USDC Prime, our oldest vault on Morpho, is designed to be highly liquid and risk-conscious. Zama's confidentiality layer integrates directly into that framework, allowing institutions to access the same strategy without broadcasting their positions. Privacy where it is needed, with compliance and auditability intact,” said Sébastien Derivaux, Co-founder of Steakhouse.

Zama described the vault as an initial integration that could be extended to other confidential assets and stablecoins using Morpho's infrastructure. Morpho said it has more than USD $11 billion in deposits, while Steakhouse said it oversees more than USD $4.5 billion in total value locked.

Zama was founded by Dr. Pascal Paillier and Dr. Rand Hindi and focuses on privacy tools for digital assets on public blockchains, including Ethereum and Solana. The confidential version of the Steakhouse USDC Prime vault will open for deposits through the Zama app, according to the company.