Tether Launches Confidential USDT on Zama, Surpassing $131M in Shielded Transactions

Tether has officially launched its USDT on Zama, an onchain confidentiality protocol that employs fully homomorphic encryption to protect transaction amounts and balances from public visibility on blockchains. This integration transforms standard USDT into a confidential variant known as cUSDT, enabling users to transact on Ethereum while keeping their financial details private.

Utilizing the ERC-7984 standard, Zama wraps public ERC-20 tokens into confidential versions through a two-transaction process. As of mid-September 2026, cUSDT has recorded a cumulative shielded volume of $131.3 million, with a current total value locked (TVL) of $7.7 million. This rapid adoption follows the protocol's first confidential USDT transfer in January 2026.

In addition to the launch, Zama has introduced a swap protocol that allows users to exchange cUSDT with other confidential tokens. On September 15, the protocol added 16 confidential Morpho vaults, including products denominated in cUSDT, with one vault reaching $40 million in TVL within just seven weeks of its debut.

Importance of Privacy for Stablecoins

Transparency in Ethereum transactions can pose risks for corporate treasuries managing large sums, as competitors can observe payment flows and traders can front-run orders. With global stablecoin settlements exceeding $33 trillion in 2025, the need for privacy has become increasingly critical.

Zama's use of fully homomorphic encryption allows for operations on encrypted data, enabling the blockchain to process transactions and enforce rules without revealing actual figures. This approach positions Zama favorably in terms of compliance, as it wraps regulated stablecoins like USDT while maintaining the possibility for authorized audits.

The launch of the $ZAMA token in February 2026 further enhances the ecosystem, capturing protocol fees from confidential transactions and serving as a staking asset for network operators. With the recent addition of confidential vaults, Zama is expanding its reach into institutional DeFi strategies, providing yield-seeking capital opportunities without exposing sensitive information.