Coinbase Rolls Out Bitcoin-Backed Loans with Morpho

Coinbase, the largest U.S.-based crypto exchange by volume, is rolling out bitcoin-backed loans in the U.S., allowing customers to borrow up to $100,000 in USDC stablecoins.

While the transactions are processed through Coinbase’s front end, the loans themselves come from Morpho, a decentralized finance (DeFi) lending platform on the Base blockchain.

The crypto lending protocol allows the user to borrow up to 86% of the value of their bitcoin collateral to account for bitcoin’s price volatility. If the collateral’s value drops below a set percentage of the value of the stablecoins borrowed, it is liquidated.

The loans are open to residents of every state except New York.

Saying Coinbase is always looking for ways to make it easier for customers to access financial tools, Coinbase Vice President of Product Max Branzburg told The Defiant the loans are “another vital step in our mission of unlocking economic freedom for all, providing new and improved utility through a much more efficient loan offering with Morpho.”

Morpho is built on Base, the Ethereum Layer 2 blockchain launched by Coinbase in August. It typically offers transaction fees of less than one cent and speeds of just a few seconds, Coinbase said.

The third-biggest lending protocol by assets held in smart contracts, Morpho has $3.74 billion total value locked.

All in the family

Currently only bitcoin held on Coinbase is acceptable collateral, but there are plans to expand to other cryptocurrencies.

Bitcoin collateral is exchanged for Coinbase’s wrapped bitcoin, cbBTC, and then locked into a smart contract on Morpho. At that point, the loan amount is disbursed in USDC, the stablecoin issued by Coinbase and Circle. The stablecoins can be used for on-chain investing or converted into U.S. dollars deposited in the user’s Coinbase account for free.

The latter allows borrowers access to fiat currency without selling their bitcoins and having to pay capital gains taxes.

If that all sounds like Coinbase is keeping everything in the family, well, they are. Aside from its blockchain, wrapped bitcoin and stablecoin, Coinbase Ventures invested in Morpho Labs.