Coinbase customers can borrow up to 100,000 USDC in less than a minute without ever having to sell their Bitcoin.
Coinbase has introduced a new service allowing users to borrow USD Coin (USDC), a dollar-pegged stablecoin, using Bitcoin as collateral. This feature, available to US customers (excluding those in New York), is designed to provide faster and more flexible access to funds without the need to sell Bitcoin (BTC).
According to a note shared with crypto.news, the process works like this: Customers pledge their Bitcoin as collateral, which is converted to cbBTC, a wrapped version of Bitcoin created by Coinbase. This wrapped token allows Bitcoin to operate within decentralized financial systems.
The cbBTC is then sent to Morpho, an on-chain lending protocol built on Coinbase’s Base blockchain. In exchange, users receive USDC loans, which can be used to cover expenses, transferred globally, or converted to US dollars.
Unlike traditional loans, there is no fixed repayment schedule. Borrowers can repay at their own pace as long as the loan remains within a safe value range relative to the collateral. However, if the value of Bitcoin falls significantly, liquidations may take place to ensure the loan remains covered.
Crypto lending is a bit dodgy as companies like Celsius and BlockFi went bankrupt in 2022, causing billions in losses and damaging trust in crypto lending. With this news, Coinbase now acts as an intermediary for loans powered by Morpho, a DeFi protocol.
Advantages of cryptocurrency-backed loans
Cryptocurrency-backed loans offer several advantages. Borrowing against Bitcoin instead of selling it allows users to defer capital gains taxes. Additionally, on-chain lending systems operate transparently, using automated smart contracts to manage funds efficiently.
The move follows Coinbase’s September launch of cbBTC, which allowed customers to interact with DeFi applications. By combining cbBTC with USDC loans, Coinbase connects traditional finance with decentralized tools, making these services more accessible to users.
To get started, customers can go to the Cash tab of their Coinbase accounts, pledge Bitcoin, and receive USDC in seconds. Loan interest rates automatically adjust based on market activity on the base blockchain. This launch represents a new step towards more user-friendly decentralized finance.
