Zama Launches First Confidential USDC Yield Vault With Morpho

Steady attention without excessive speculation.

The vault lets holders of Confidential USDC, known as cUSDC, earn confidential USDC yield without revealing their balances on-chain. For institutions, that solves a long-standing problem. Until now, lending on a public chain meant broadcasting every position to competitors.

How the Confidential USDC Yield Vault Works

The product is a three-way partnership. Zama supplies the encryption stack, Morpho provides the lending rails, and Steakhouse curates the strategy. Together they let cUSDC flow into the Steakhouse USDC Prime approach on Morpho.

According to Zama’s official announcement, the vault opens for deposits on June 23, 2026. The team published the details on June 17. So far, no deposit caps or minimums have surfaced.

How cUSDC Keeps Balances Private

cUSDC is a wrapped version of Circle’s USDC. Zama built it on its confidential token standard, ERC-7984. Each token is backed one-to-one by USDC held in a pooled wrapper contract.

Regular USDC shows every balance and transfer on Etherscan. By contrast, cUSDC encrypts balances, deposit sizes, and transaction amounts. Only the holder, using a viewing key, or an authorized party can see them.

This privacy layer is central to the zama usdc yield model. It allows users to access DeFi yield while keeping individual balances and deposit details hidden from public view.

The verified cUSDC contract sits at 0xe978…72B2 on Ethereum. Deposits are also reportedly batched, so only aggregate totals surface publicly.

Where the Yield Comes From

The returns run on Steakhouse’s USDC Prime strategy. It lends through what Steakhouse calls a dual engine: blue-chip crypto collateral and real-world asset markets. The mix shifts depending on conditions.

Zama did not disclose an APY in its primary announcement. However, secondary summaries cite a net range of 3.5% to 5%, in line with existing Steakhouse vaults. A comparable transparent Steakhouse vault on Morpho holds roughly $97 million in deposits.

Custody and execution stay inside Morpho, while Steakhouse handles allocation and risk. The curator reportedly manages billions in TVL across platforms and reports no bad debt to date.

Zama’s Push Into Confidential Finance

Zama has moved fast. The FHE firm raised a $57 million Series B in June 2025 and reached unicorn status. It then ran a public token sale in January 2026. Its mainnet went live on December 30, 2025 with the first confidential stablecoin transfer.

cUSDC followed on Ethereum using the ERC-7984 standard. The new vault now extends that work from simple transfers into yield. In short, the zama usdc yield launch shows that encrypted stablecoins can finally earn.

What FHE Brings to DeFi Lending

The zama usdc yield model relies on Fully Homomorphic Encryption, or FHE. In plain terms, FHE lets smart contracts run math on encrypted data without decrypting it first.

As a result, the vault can calculate allocations and accrue interest directly on encrypted balances. Individual deposit sizes and positions stay hidden throughout. The approach keeps full composability with other DeFi protocols, which mixers and privacy coins cannot offer.

“Confidentiality and decentralization are no longer mutually exclusive,” said Rand Hindi, co-founder and CEO at Zama. He added that operating on a public blockchain once meant exposing your entire financial playbook to competitors.

Morpho frames the appeal in similar terms. “One thing we keep hearing from institutions is the demand for confidentiality onchain,” said co-founder Merlin Egalite. The stack, he said, lets them allocate into vaults without compromising operational privacy.

Early Reaction to the Confidential Yield Launch

Reaction across X has skewed bullish, though volume stayed modest on day one. Ecosystem accounts called the launch massive for DeFi, and several framed private stablecoin yield as the missing piece for institutional capital. As one common refrain put it, privacy stays a meme until capital can actually move with it.

The Block also covered the launch, noting that firms can now earn yield without exposed balances. Even so, supporters and skeptics agree on one test. The real signal will be how much TVL the confidential vault attracts after June 23.

The Privacy and Compliance Trade-Off

The launch arrives weeks after a stress test. Between May 30 and June 2, 2026, a court order pushed Circle to blacklist the pooled cUSDC wrapper. That order tied to an unrelated Overnight Finance deposit. The freeze briefly caught innocent holders, with about $12.6 million exposed.

Zama resolved the incident with what it calls transitive compliance. Still, critics point to the episode as evidence of pooled-wrapper risk and centralized issuer power. Skeptics also question FHE’s gas costs and the AML implications of confidential stablecoins.

Steakhouse co-founder Seb Ventures framed the balance directly. “Privacy where needed, with compliance and auditability intact,” he said. Viewing keys let auditors and regulators see specific data without exposing everything to the public.

What to Watch Before the Confidential USDC Yield Vault Opens

Several details remain undisclosed before June 23. The exact net APY, the new vault’s contract address, deposit caps, and audit scope are all still unknown.

Real-world performance will also matter. FHE operations cost more gas than plaintext, so live data on fees and latency will test the design. Meanwhile, early TVL will show whether institutions actually move capital.

For now, confidential USDC yield is live in announcement only. The deposits, and the verdict, arrive on June 23. This article is informational and not financial advice.