Coinbase, a cryptocurrency exchange, has introduced a new service enabling U.S. customers (except those in New York) to borrow funds using their Bitcoin holdings as collateral.
This service allows users to access liquidity without selling their Bitcoin, offering instant loans with flexible repayment terms and competitive interest rates. The loans are powered by Morpho, an open-source lending protocol operating on Coinbase’s Layer-2 blockchain, Base.
Borrowers receive the loan amount instantly in USDC, with repayment options and interest rates dynamically determined by Morpho’s open market lending pool.
“Getting a Bitcoin-backed loan on Coinbase is now easier and faster than ever. In under a minute, you can get a loan in USDC without ever having to sell your bitcoin,” the company stated.
This initiative seeks to balance the long-term benefits of holding crypto assets with the need for immediate financial flexibility.
When users borrow USDC against their Bitcoin, their collateral is automatically converted into Coinbase Wrapped Bitcoin (cbBTC) at a 1:1 ratio and deposited into the Morpho protocol. Launched in September, cbBTC enables customers to utilize their Bitcoin on-chain while remaining within the Coinbase ecosystem as collateral.
Users can borrow up to $100,000 USDC, depending on the value of the Bitcoin they pledge. Interest rates are variable and dynamically adjusted in real-time by Morpho, aligning with market conditions and updated with each block creation on the Base blockchain.
The loan terms are flexible, with no fixed repayment schedule, and users can easily track their loan status through the Coinbase app. However, liquidation occurs if the loan amount, including accrued interest, exceeds a predefined threshold relative to the collateral’s value.
Coinbase highlights the advantages of borrowing against Bitcoin rather than selling it, noting potential tax benefits from deferring capital gains or losses.
This Bitcoin-backed loan service is part of Coinbase’s broader mission to provide customers with “greater control over their financial lives.” By integrating Coinbase’s accessibility with the decentralized and transparent nature of on-chain protocols, the company aims to deliver significantly enhanced financial services.