Zama, Morpho and Steakhouse bring confidential USDC yield to Ethereum

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Ethereum DeFi gets confidential yield vault

Highlights

Zama, Morpho, and Steakhouse are launching a confidential USDC yield vault on Ethereum.
Deposits for the Steakhouse Confidential USDC Prime vault are expected to open June 23.
Zama’s cUSDC uses fully homomorphic encryption to shield balances and transfers.
The product targets institutions that want DeFi yield without revealing onchain strategies.

A private route into USDC yield

According to The Block, the Steakhouse Confidential USDC Prime vault will allow holders of Zama’s cUSDC, an encrypted version of Circle’s USDC stablecoin, to deposit into Morpho’s existing Steakhouse USDC Prime vault. Deposits are scheduled to open on June 23 through the Zama app.

The structure is meant to preserve key features of public blockchains, including auditability and compliance screening, while shielding user balances, transfer amounts, and strategy details from public view. Zama’s system uses fully homomorphic encryption, a form of cryptography that allows computation on encrypted data, to convert standard USDC directly on Ethereum without requiring a bridge to another blockchain.

Once USDC is shielded as cUSDC, users can allocate it to Morpho vaults and retain access to Morpho’s lending infrastructure and capital-efficiency model. Steakhouse’s USDC Prime vault is one of its older Morpho products and is positioned as a liquid, risk-conscious stablecoin strategy.

Institutional DeFi seeks a privacy layer

The launch addresses one of the clearest barriers to institutional use of DeFi: public visibility. Onchain finance offers fast settlement and transparent market infrastructure, but it also exposes positions, transfers and strategy timing to competitors, analytics firms and potential front-runners.

For asset managers, corporate treasuries, and trading firms, that visibility can be a deterrent. Confidential vaults may offer a middle ground, allowing institutions to use DeFi rails while keeping sensitive operational data private.

The integration also follows a period of rapid activity around the three firms. Morpho closed a $175 million funding round this month co-led by Paradigm, a16z crypto, and Ribbit Capital, with Apollo Funds, Circle Ventures, and VanEck also participating. The round valued the protocol at roughly $2 billion.

Zama has also expanded its institutional infrastructure push. The company acquired TokenOps last month to support encrypted token distributions and partnered in March with Apex Group-backed T-REX Network to apply its encryption layer to tokenized real-world assets using the ERC-3643 standard.

Privacy Meets Compliance Pressure

The product arrives shortly after a legal episode that showed both the promise and limits of confidential stablecoins. A federal judge ordered Circle last month to blacklist Zama’s cUSDC contract after about $12.6 million tied to litigation involving Overnight Finance flowed into it, freezing funds inside the contract.

That case underscored a central tension for confidential DeFi. Privacy tools can protect users from market surveillance, but stablecoin wrappers still operate within legal and compliance systems. For the new vault, the commercial question is whether institutions see that balance as a strength rather than a weakness: private enough to protect strategy, but auditable enough to satisfy counterparties, issuers, and regulators.

We also reported Ethereum Foundation unveils comprehensive privacy roadmap with new PSE mission.

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