Coinbase customers can borrow up to $100,000 USDC in less than one 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, by using Bitcoin as collateral. The feature, available to U.S. customers (excluding those in New York), is designed to offer quicker and more flexible access to funds without the need to sell Bitcoin (BTC).
According to a note shared with crypto.news, the process works as follows: Customers pledge their Bitcoin as collateral, which is converted into cbBTC, a wrapped version of Bitcoin created by Coinbase. This wrapped token allows Bitcoin to function within decentralized finance 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 for expenses, transferred globally, or converted into U.S. dollars.
Unlike traditional loans, there are no fixed repayment schedules. Borrowers can repay at their own pace as long as the loan remains within a safe value range relative to the collateral. However, if Bitcoin’s value drops significantly, liquidations may occur to ensure the loan remains covered.
Crypto lending is a bit dubious as firms like Celsius and BlockFi went bankrupt in 2022, causing billions in losses and damaging trust in crypto lending. With this news, Coinbase is now acting as a middleman for loans powered by Morpho, a DeFi protocol.
Benefits of crypto-backed loans
Crypto-backed loans provide 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.
This move follows Coinbase’s September launch of cbBTC, which enabled customers to interact with DeFi applications. By combining cbBTC with USDC loans, Coinbase bridges traditional finance with decentralized tools, making these services more accessible to users.
To get started, customers can navigate to the Cash tab in their Coinbase accounts, pledge Bitcoin, and receive USDC within seconds. Loan interest rates adjust automatically based on market activity on the Base blockchain. This launch represents another step toward making decentralized finance more user-friendly.
