- Coinbase reintroduces Bitcoin-backed loans, offering up to $100K in USDC via Morpho protocol.
- Borrowers must maintain a 133% collateral ratio and loans are processed instantly in under a minute.
- Bitcoin-backed loans market projected to grow from $8.5B in 2024 to $45B by 2030.
Coinbase has reintroduced Bitcoin-backed loans, allowing users to borrow up to $100,000 in USDC without selling their Bitcoin. The service, launched in partnership with decentralized finance protocol Morpho, signifies Coinbase’s return to the lending market after the discontinuation of its Borrow program in 2023. Morpho, operating on the Base blockchain, manages the loans, which are instantly processed and transferred to users’ Coinbase accounts.
Users participating in this service must provide Bitcoin as collateral, which is converted into Coinbase-wrapped Bitcoin (cbBTC) at a 1:1 ratio without additional fees. Borrowers must maintain a minimum collateral ratio of 133%, ensuring a secure loan-to-value (LTV) threshold. If the loan balance exceeds 86% of the collateral’s market value, Coinbase initiates liquidation, returning the remaining Bitcoin to the user after deducting penalty fees. Interest rates, determined by Morpho, adjust dynamically with market conditions.
The new lending service aims to provide users with flexibility. There are no fixed repayment deadlines or minimum payments, provided users maintain the required LTV ratio. Borrowed USDC can be used for various purposes, including on-chain activities or conversion to fiat for real-world expenses. Coinbase highlighted the tax advantages, stating that borrowing allows users to delay taxable gains by avoiding Bitcoin liquidation.
The service provided is active in every state in the US except New York and Coinbase plans to expand the offering further. Currently, only Bitcoins can be used as collateral, however, the company is working on expanding tokens acceptance list. Coinbase also brought to the user’s notice that USDC loans are provided on ten blockchains such as Ethereum, Solana, Polygon, and others, making the access for the users easier on several networks.
Coinbase’s move marks a significant shift in the DeFi lending landscape. The company aims to address issues related to decentralized finance, such as complex interfaces, by providing a streamlined intermediary platform. Paul Frambot, CEO of Morpho, highlighted the adaptability of their platform, which allows Coinbase to maintain control over its products while innovating in the lending sector.
Related: https://cryptotale.org/bitcoin-hotspots-top-10-cities-with-the-most-crypto-atms/
Need for loans backed by bitcoins is ever on the rise. They give users an opportunity to borrow money and yet not sell their stakes, this is sometimes used by the rich to avoid distress sales. Bitcoin as an asset is being valued highly in the market and more institutions are likely to get involved in Bitcoin backed loans. As estimated by the HFT Market Intelligence, the market in 2024 was estimated to $8.5 billion and is expected to hit $45 billion in 2030.
This reintroduction comes after the firm experienced the stiff test in the crypto lending arena. In 2022, many DeFi lending platforms including BlockFi and Celsius, both filed for bankruptcy, causing significant losses. To prevent such problems, Coinbase has added overcollateralization and clearly defined the rates of interest. Applying modern DeFi protocols, Coinbase plans to provide people with trustful environment in the sphere of decentralized lending.
