Zama, Morpho and Steakhouse Financial launched on June 23, 2026 the first DeFi yield product built for confidential USDC on Ethereum. The Steakhouse Confidential USDC Prime vault lets holders of cUSDC, Circle’s encrypted stablecoin, earn yield by depositing into Morpho’s lending infrastructure without exposing their balances or transfers on-chain.
🔑 Key Takeaways
- Steakhouse Confidential USDC Prime launched June 23, 2026 as the first DeFi yield strategy on cUSDC encrypted via FHE
- Partnership between Zama (encryption layer), Morpho ($11B deposits) and Steakhouse Financial ($4.5B TVL)
- Same risk parameters and allocations as the public Prime v2 vault, collateral basket of cbBTC, WBTC and wstETH
- Prior incident: $12.5M in USDC frozen for 3 days following a civil dispute resolved by a US federal court
- Product serves as template for future confidential vaults and was followed by private swaps on Ethereum in September 2026
A DeFi vault built on homomorphic encryption
The product relies on cUSDC, an ERC-20 token deployed by Zama in early 2026 whose amount and balance stay encrypted on Ethereum thanks to fully homomorphic encryption (FHE). This cryptographic primitive lets a smart contract perform computations on encrypted data without ever decrypting it, setting FHE apart from other on-chain confidentiality techniques such as zero-knowledge proofs or trusted execution environments.
To access the vault, users convert their standard USDC into cUSDC through the Zama app in a single transaction, with no bridge to another blockchain. Once converted, the funds are deposited into the Steakhouse Confidential USDC Prime vault, which routes them to Steakhouse’s existing public Prime v2 strategy on Morpho. The vault parameters remain unchanged from the public version: same allocations, same risk parameters, same collateral basket made up of cbBTC, WBTC and wstETH through Morpho Blue markets.
End-to-end confidentiality across every step
Balances, deposit amounts and transfer values stay encrypted on Ethereum. Vault accounting, including yield accrual and share minting, runs on the encrypted state. Health checks and risk parameters operate on the same primitives, allowing the curator to verify solvency without viewing individual positions. Only aggregated statistics remain visible, as they are required to monitor the vault’s solvency and to give allocators a high-level view of capacity utilization.
« Until now, operating on a public blockchain meant exposing your entire financial strategy to competitors. By bringing fully homomorphic encryption to core financial primitives like lending vaults, we show that privacy and decentralization are no longer mutually exclusive. »
Rand Hindi, CEO and co-founder of Zama
Morpho and Steakhouse: inherited credit infrastructure
The confidential vault relies on Morpho’s existing credit infrastructure, which exceeds $11 billion in deposits, rather than spinning up a parallel risk protocol. Steakhouse Financial acts as curator, setting collateral parameters, allocations and risk caps, exactly as it does on the public Prime v2 vault. According to The Defiant, Steakhouse extended its lead over the second-largest Morpho curator to roughly $1 billion last month, consolidating its position as the dominant allocator on the protocol.
Routing to Morpho’s vault infrastructure fills a gap Zama had identified: before June 17, 2026, an encrypted balance could not earn yield without sacrificing the privacy that justified the cUSDC wrapper. Importing an existing lending venue pools liquidity and market depth with the public vaults, avoiding the fragmentation that often plagues encrypted DeFi experiments and giving institutional allocators a familiar venue to deploy into.
Comparing public and confidential vault characteristics
| Feature | Steakhouse Prime v2 (public) | Steakhouse Confidential USDC Prime |
|---|---|---|
| Deposited asset | Standard USDC | cUSDC encrypted (FHE) |
| Underlying strategy | Morpho Blue markets | Morpho Blue markets |
| Accepted collateral | cbBTC, WBTC, wstETH | cbBTC, WBTC, wstETH |
| Curator | Steakhouse Financial | Steakhouse Financial |
| Balance visibility | Public | Encrypted end-to-end |
| Steakhouse cumulative TVL | ~$4.5B | Same underlying strategy |
« One thing we hear constantly from institutions is the demand for onchain privacy. Zama’s privacy stack built on top of Morpho lets institutions allocate into Morpho vaults just like any other onchain allocation without compromising operational privacy. »
Merlin Egalite, co-founder of Morpho
A prior incident that validates the product’s robustness
A few weeks before the launch, a US federal court lifted a temporary blocking order that had led Circle to blacklist Zama’s cUSDC contract, freezing approximately $12.5 million in USDC for three days. The freeze was triggered by a civil lawsuit involving a single depositor whose position represented more than 99% of the contract’s initial balance, prompting the issuer to apply its conservative freeze policy.
Zama said the resolution validated its position that the freeze was unwarranted, and the company continued building the yield product on the unmodified cUSDC architecture. The episode illustrates the persistent tension between a centralized stablecoin issuer’s freeze powers and the privacy promise of an encrypted on-chain asset, without undermining the technical viability of the product or the trust of institutional allocators.
Shielding campaign and early adoption
Before the launch, Zama ran a shielding campaign from June 17 to 22, 2026, encouraging users to convert at least 10 USDC into cUSDC to enter a lottery on June 23 using Zama protocol’s randomization feature. Twenty-five winners each received $1,000 in cUSDC, for a total prize pool of $25,000 and a measurable priming effect on the initial TVL.
« The economy is rapidly stablecoinizing. 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-aware. Zama’s privacy layer plugs directly into that framework, letting institutions access the same strategy without broadcasting their positions. Privacy where it is needed, with compliance and auditability intact. »
Sébastien Derivaux, co-founder of Steakhouse Financial
Outlook: a template for confidential stablecoins
The Steakhouse Confidential USDC Prime vault serves as a template for future yield products targeting various confidential assets and stablecoins, all powered by Morpho. Several industry observers note the biggest challenge may lie in user experience simplicity rather than cryptography itself: if the product can make encrypted deposits feel like an ordinary lending or yield product, it stands a better chance of reaching an audience beyond privacy specialists.
The success of the first vault, which crossed $40 million in TVL according to The Block, paved the way for an expansion of Morpho’s confidential lineup. On September 15, 2026, Zama announced the launch of private swaps on Ethereum, letting users trade encrypted assets without revealing amounts or counterparties. This second functional brick fills the gap of confidential on-chain liquidity for asset exchanges and cements the Zama-Morpho-Steakhouse stack as a private institutional DeFi infrastructure.
Conclusion
The launch of Steakhouse Confidential USDC Prime marks a concrete milestone in the industrialization of confidential DeFi on Ethereum. By combining Zama’s FHE, Morpho’s depth ($11B in deposits) and Steakhouse’s curation expertise ($4.5B TVL), the product delivers DeFi yield on encrypted stablecoins for the first time without creating a parallel risk silo. Strong early adoption, the resolution of the Circle dispute and the extension to private swaps point to a credible trajectory, provided the encryption layer remains auditable, FHE performance keeps scaling with demand, and the user experience does not grow so complex that it limits institutional uptake.
Sources
This article is published for informational and educational purposes only. It does not constitute investment advice. Do your own research (DYOR) before making any decision.
