Private DeFi: Zama deploys 16 confidential vaults on Morpho following a successful $40 million pilot

Zama launches 16 confidential vaults on Morpho

The on-chain privacy protocol Zama officially announced this September 15 the opening of deposits for 16 confidential vaults deployed via Morpho. These vaults cover several assets, including the USD stablecoins USDC, USDT, and AUSD, the wrapped Bitcoin WBTC, and the tGBP stablecoin pegged to the British pound.

Five curators—the vault managers well-known in the crypto sector—are overseeing these new products: Steakhouse Financial, Armitage by Wintermute, Flowdesk, RockawayX, and Bitwise. Twelve of these vaults are confidential versions of existing Morpho products on Ethereum, while four others were created specifically to receive encrypted deposits.

This launch builds on the success of an initial pilot vault operated with Steakhouse Financial via the USDC Prime strategy. That vault reached $40 million in TVL (Total Value Locked) in just seven weeks after its launch in June 2026.

Confidential DeFi at scale, live today.

Zama is the fastest growing confidentiality protocol for onchain finance.

Today, Zama expands confidential access to 16 curated yield vaults across 5 institutional curators and 5 assets: USDC, USDT, AUSD, WBTC, and tGBP, all deployed on… pic.twitter.com/OEJtKZIptP

— Zama (@zama) September 15, 2026

Privacy: an argument tailored for institutions

On a public blockchain, positions, balances, and strategies are visible to competitors and front-runners (who exploit visible transactions before execution for profit). This is what Zama refers to as a "structural bottleneck for large-scale institutional deployment." Confidential vaults allow allocators, corporate treasuries, and market players to access on-chain yields without revealing their positions or strategies.

Merlin Egalite, co-founder of Morpho, confirms this logic. According to him, the addition of these confidential vaults on Morpho is "an important milestone (…) to efficiently develop confidential DeFi and unlock new possibilities on blockchains (…)."

More choices for confidential yield via @zama

Capital allocators can confidentially deposit into Morpho Vaults curated by @SteakhouseFi @Bitwise @RockawayX @flowdesk_co and Armitage by @wintermute_t, without having to disclose their strategies & balances. pic.twitter.com/13NL8w7Ex3

— Morpho 🦋 (@Morpho) September 15, 2026

What differentiates Zama from the competition in private DeFi

Zama's approach stands out significantly from other confidential DeFi protocols. It relies on "fully homomorphic encryption" (FHE).

This cryptographic technique allows calculations to be performed directly on encrypted data without ever needing to decrypt it. Thus, a computer can process, add, or compare data while remaining "blind" to the actual content.

Applied to the blockchain, FHE allows a smart contract to execute transactions (transfers, allocations, vault strategies) without amounts or positions ever being visible in plain text on the blockchain. This is the core privacy argument put forward by Zama.

Another unique feature of Zama is its direct integration into an established DeFi protocol like Morpho on Ethereum, which does not require allocators to migrate to a private Layer 2 (L2) solution or a dedicated app-chain.

Pendle and Merkl incentives: a familiar framework but no published figures yet

Neither Zama, nor Morpho, nor the curators have communicated specific rates, budgets, or durations for the incentives that Pendle and Merkl will distribute on the 16 new confidential vaults. On Morpho, rewards are always distributed via Merkl, which calculates rewards off-chain based on on-chain activity and makes them claimable every eight hours. The APRs displayed per vault therefore depend on the budget allocated per campaign and the current TVL, with the APR diluting as more liquidity enters.

The only quantified point of comparison comes from the June pilot vault. Zama oversaw a 12-week boost program that supplemented the native yield of approximately 4% from the Steakhouse Financial USDC Prime strategy, with declining distributions in waves (weeks 1–2, 3–6, then 7–12), thereby favoring early deposits.

Incentives were the only thing confidential assets couldn't benefit from, because rewarding a balance implied viewing it. It was a real pleasure working with the Zama team to change this (…) so that [incentive] campaigns could run on encrypted balances. Depositors see an APR and earn returns, while no position, no reward, and no leaderboard ranking is ever made public.

Merkl and Pendle will manage the incentives to attract liquidity into the 16 new confidential vaults.

On-chain privacy and regulatory obligations: finding a balance

One central question remains for institutions: how to reconcile encrypted balances with obligations to provide activity reports to regulators (such as the SEC in the U.S. or under the MiCA regulation in the EU) or even to auditors?

Zama defends an approach called "programmable compliance." Unlike mixers like Tornado Cash, FHE technology allows developers to define access rules that determine who can decrypt what, authorizing compliant privacy rather than absolute anonymity (as found on Monero (XMR), for example).

The ERC-7984 standard, upon which Zama's confidential ecosystem relies, includes optional modules for KYC/AML restrictions, account freezing, and compliance for Real-World Assets (RWA). Zama compares the model to a bank: transactions are private by default, but the institution submits reports to regulators, and courts can obtain records when justified.

👉 On the same topic – Crypto: toward "confidential" DeFi? Some protocols are organizing

A confidential swap protocol completes the offering

In parallel with the vaults, Zama has launched the Zama Swap Protocol, which allows the swapping of confidential assets on Ethereum. It covers cUSDC, cUSDT, cAUSD, and cTGBP, as well as shares of confidential vaults. Users can perform these swaps without revealing the size of the transaction or their intent.

At the time of writing, the ZAMA token is trading around $0.047, down slightly by 1.5% over 24 hours, but up 13.4% over the last thirty days. The protocol's TVL stands at nearly $59.4 million, according to DefiLlama.

👉 To go further – Zama launches its mainnet and performs the first confidential stablecoin transfer on Ethereum

Sources: Zama, DefiLlama