Coinbase is introducing Bitcoin-backed loans, leveraging the largest lending platform on its Base network, Morpho.

Coinbase is now offering Bitcoin-backed loans through the integration of Morpho, the largest lending platform on Base.

Coinbase users can borrow USDC against their Bitcoin on Morpho, with the integration making the process more accessible by directly incorporating Morpho’s lending functionality into Coinbase's UI.

In traditional finance, credit scores are used to evaluate borrowers for loans. However, since credit scores are not applicable in the crypto space, platforms like Morpho require borrowers to provide collateral that substantially exceeds the loan amount to mitigate the risk of defaults.

"This is a moment where we're planting a flag that Coinbase is coming on-chain, and we're bringing millions of users with their billions of dollars," said Max Branzburg, Coinbase’s head of consumer products.

Coinbase’s loans have a maximum cap of $100,000 in USDC, necessitating collateral in Bitcoin that is more than double the loan amount. In the event that the loan-to-value ratio becomes critical, Morpho will liquidate the collateral.

"If price swings are reaching any sort of dangerous point, we will share liquidation warnings through the Coinbase app so that you're aware of it and can act," Branzburg explained.

These loans offer several benefits, including earning over 4% in USDC rewards, making global USDC transfers for free, and using USDC on-chain.

Furthermore, users can convert USDC to USD at a 1:1 ratio without incurring any fees, allowing them to cover substantial expenses such as purchasing a car or making a mortgage downpayment. By borrowing against bitcoin instead of selling it, users can postpone realizing taxable gains or losses.

Earlier this month, Coinbase was subpoenaed by the Commodity Futures Trading Commission (CFTC) as part of its investigation into the blockchain-based prediction market Polymarket.

Coinbase notified impacted users that they "may be required to send information" to the CFTC, subject to legal proceedings.