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Coinbase Brings Back Bitcoin-Backed Loans with Morpho’s DeFi Integration
January 16, 2025 – In a surprise move, Coinbase has announced its return to the lending market with the introduction of Bitcoin-backed loans powered by Morpho, a decentralized finance protocol.
The new service allows users to borrow up to $100,000 in USDC instantly without selling their Bitcoin. This development marks a significant shift for Coinbase, as it exits its previous Borrow program in November 2023 and re-enters the lending space with a fresh approach.
To facilitate this integration, Morpho’s DeFi protocol converts the users’ Bitcoin collateral into Coinbase-wrapped Bitcoin (cbBTC) at a 1:1 ratio without any fees. The cbBTC is then transferred to Morpho, which disburses USDC loans directly to users’ Coinbase accounts in under a minute.
The loan terms require a minimum collateral ratio of 133%, with borrowers able to adjust their loan-to-value (LTV) ratio above this threshold. However, if the loan balance reaches 86% of the collateral’s market value, the collateral is liquidated, triggering repayment and penalty fees. Any remaining Bitcoin will be returned to borrowers.
Interest rates are set by Morpho and adjust automatically with market conditions, updating every few seconds with each block creation on the Base blockchain. This dynamic interest rate system ensures that borrowers pay the most competitive rates available at all times.
One of the key benefits of this service is its flexible repayment terms. Borrowers can choose to make no minimum payments or fixed due dates, as long as they maintain an appropriate LTV ratio. This feature allows for greater financial flexibility and potentially reduces credit risk.
Initially, the service will be available across the United States except for New York. However, Coinbase has announced plans to expand its reach further in the coming months, with a goal of supporting multiple cryptocurrencies in the future.
The return of Bitcoin-backed loans on Coinbase marks an important step forward in the company’s strategy to provide users with more opportunities to use their digital assets as collateral.
Source: cryptobriefing.com
