KEY POINTS
- For now, the loans will utilize Bitcoin as collateral but Coinbase plans to add more assets in the future
- Base open-source lending protocol Morpho will calculate interest rates based on market conditions
- Users can convert $USDC to USD 1:1 for free for major expenses such as car purchases or mortgage payments
Cryptocurrency exchange giant Coinbase today announced the launch of its Bitcoin-backed USDC loans powered by Morpho, an open-source lending protocol on Base that's also the first decentralized finance (DeFi) offering at this scale, marking a major step toward providing customers with more control over their finances through the power of onchain technology.
Users can get a Bitcoin-backed USDC loan on Coinbase in under a minute without the need to sell their BTC. The loans will use BTC as collateral for now, but there are plans to add more assets in the future.
"Coinbase is revolutionizing personal finance by bringing it onchain. From crypto-backed loans to seamless USDC conversion, we're bridging traditional finance with decentralized innovation," Max Branzburg, VP of Product at Coinbase, said in a statement shared with International Business Times.
How It Works
Coinbase is committed to empowering customers with greater control over their finances, and the new offering is one giant step in the right direction. To access Coinbase's Bitcoin-backed USDC loans, you just need to:
- Go to the Cash tab on your Coinbase account
- Click on Borrow and enter the amount of USDC you'd like to borrow against your BTC
- Confirm the amount
Coinbase noted that borrowing against Bitcoin instead of selling it can help delay a tax gain or loss. Furthermore, customers no longer need to choose between preserving wealth for the future and spending it today since the loans are powered by Morpho, which grants access to competitive interest rates set by the protocol's onchain open market lending pool.
Key Features of Coinbase's $BTC-Backed $USDC Loans
Since the launch of the Coinbase Wrapped Bitcoin (cbBTC), customers were given the ability to move and use their Bitcoin onchain. With the new offering, customers can now tap into the benefits of cbBTC without leaving Coinbase. Other key features of the loans include:
- Up to $100,000 in USDC can be borrowed, depending on how much Bitcoin a user has to pledge as collateral.
- The BTC pledged as collateral will automatically be converted into cbBTC and transferred onchain to a Morpho smart contract.
- The borrowed USDC will appear on a user's Coinbase account within seconds after Morpho disburses the loan.
- Interests are calculated by Morpho based on market conditions.
- For major expenses such as making mortgage payments or buying a car, users will be able to convert USDC to USD 1:1 at no cost.
- The offering has flexible repayment terms, and there is no fixed repayment schedule.
- The loans' availability will start in the U.S. (excluding the New York state), but Coinbase plans to expand to more markets in the future.
- Loans can be monitored directly from the Coinbase app.
It is worth noting that if a loan amount, including accrued interest, reaches a certain threshold that's relative to the value of the collateral, liquidations will be triggered.
Coinbase has long been championing economic freedom and seeks to provide consumers with financial services that reflect decentralization, transparency, and accessibility to smarter wealth management.
