Coinbase, one of the leading cryptocurrency exchange platforms, has introduced its new Bitcoin-backed loan offering of up to $100,000 in USDC
Coinbase, the renowned cryptocurrency exchange, has ventured into the realm of decentralized finance (DeFi) with the launch of a new Bitcoin-backed loan service. This offering allows users to borrow up to $100,000 in USDC, a stablecoin pegged to the US dollar, using their Bitcoin holdings as collateral.
The integration with the Base network, a scalable Ethereum layer 2 incubated by Coinbase, enables efficient operations and greater scalability. While the loan process is facilitated by Morpho, a leading DeFi protocol, it operates exclusively on the Base network and not on Ethereum.
This marks a significant shift from Coinbase's previous Bitcoin-backed loan offering through its “Borrow” program, which was discontinued in 2023 to prioritize higher-demand products. Now, Coinbase is re-entering the market with a more DeFi-centric approach.
Morpho, one of the largest DeFi protocols, boasts over $3.7 billion in total value locked (TVL), as reported by DefiLlama. The protocol has garnered support from a range of investors, including a16z Crypto, Ribbit Capital, Pantera Capital, and Coinbase Ventures.
In this collaboration, Morpho handles the technical execution of the loan, while Coinbase serves as the access interface, ensuring a seamless user experience. When a customer initiates a loan request, their Bitcoin is automatically converted into Coinbase-wrapped Bitcoin (cbBTC) and transferred to Morpho. Within less than a minute, the customer receives the loan in USDC directly in their Coinbase account.
These loans are over-collateralized, stipulating a minimum collateralization ratio of 133%. Customers have the flexibility to adjust their loan-to-value (LTV) ratio within this range. If the collateral value drops to 86%, the Bitcoin will be liquidated to cover the loan and any penalties, maintaining the stability of the loan.
The interest rates are variable and adjust automatically based on market conditions. Furthermore, the payment schedule is flexible, allowing customers to repay at their own pace as long as they maintain an appropriate LTV ratio, providing greater control over their finances.
This option is initially available only to Coinbase users in the U.S. (excluding New York), with plans to expand to other markets in the future. This service aims to meet the growing demand for innovative financial products in the cryptocurrency space.
