Coinbase Expands US Services with Bitcoin-Backed Loans of Up to $100K

Coinbase now allows US customers to borrow up to $100,000 in USDC using Bitcoin as collateral, the exchange announced today (Thursday). This offering is in collaboration with Morpho, a lending protocol on Coinbase's Base network.

This service offers an alternative to traditional credit-based loans by enabling crypto holders to tap into liquidity without parting with their assets.

“Customers can instantly borrow USDC at competitive interest rates with flexible, open-ended repayment terms,” the exchange explained. “Loans are powered by Morpho, an open-source lending protocol on Base. Crypto-backed loans will launch with Bitcoin as collateral, with plans to add more assets in the future.”

Crypto Loans On-Chain

By integrating Morpho's lending capabilities into its intuitive interface, Coinbase aims to remove technical hurdles that have historically deterred users. Unlike conventional loans that rely on credit scores, crypto-backed loans require borrowers to pledge collateral, more than the amount they intend to borrow. For example, borrowing $100,000 in USDC means pledging an equivalent or greater amount of Bitcoin.

If the collateral value dips due to market fluctuations, Morpho's protocol automatically liquidates assets to cover the loan. Coinbase mentioned that the new service will be available in the US, excluding New York state.

Coinbase's new loan service involves several interconnected steps: Users pledge Bitcoin, which gets converted to Coinbase's wrapped Bitcoin (cbBTC). cbBTC is sent to Morpho, where the USDC loan is disbursed.

Loans come with flexible repayment terms and competitive interest rates. Borrowers can manage their loans directly through the Coinbase app. Real-time updates and liquidation warnings ensure users stay informed. Borrowed funds can be used for various purposes, from financing major purchases to supporting trading activities.

Accessing Bitcoin-Backed Loans

“The launch of Coinbase Wrapped Bitcoin (cbBTC) in September gave our customers the ability to move and use their Bitcoin on-chain,” the exchange added. “Now, customers can tap into the benefits of cbBTC without having to leave Coinbase.”

Coinbase sees crypto-backed loans as a step towards reshaping personal finance. By leveraging decentralized finance (DeFi), the platform offers a transparent and user-friendly alternative to traditional banking.

Meanwhile, a judge recently ruled in favor of Coinbase, delivering a blow to the Securities and Exchange Commission over its refusal to establish clear regulations for cryptocurrency. The court criticized the SEC's handling of the matter, describing its denial of Coinbase's 2022 petition as “arbitrary and capricious.”