TLDR:
- Coinbase and Morpho have created a new lending platform enabling users to borrow USDC against their Bitcoin holdings
- Users can borrow up to $100,000, with their Bitcoin converted to cbBTC for use as collateral on Base blockchain
- The service is exclusive to US customers (except NY) for now, with EU expansion planned
- Borrowers benefit from no fixed repayment schedules and potential tax advantages
- Community feedback highlights both opportunities and concerns around centralization and liquidation risks
Coinbase has unveiled a new borrowing service that lets users leverage their Bitcoin holdings to access USDC loans.
The program, launched through a partnership with the Morpho protocol, marks a fresh approach to cryptocurrency-backed lending in the digital asset space.
The collaboration, announced on January 16, 2025, introduces a streamlined process for Bitcoin holders to access liquid funds without parting with their assets. Users can now borrow up to $100,000 in USDC, with their Bitcoin serving as collateral through Coinbase’s Base blockchain network.
At the heart of this new service lies an automated system that converts users’ Bitcoin into Coinbase Wrapped Bitcoin (cbBTC) at a one-to-one ratio. This converted cryptocurrency then moves to Morpho’s smart contracts, enabling the USDC borrowing process to begin.
The borrowing mechanism operates without traditional fixed payment schedules, offering users flexibility in managing their loans. Interest rates adjust dynamically through Morpho’s market-driven system, responding to real-time market conditions and demand.
For US residents outside of New York State, the service is now live and operational. Coinbase has indicated its intent to expand the program globally, with particular attention focused on the European Union market, where USDC aligns well with existing MiCA regulatory frameworks.
Tax efficiency stands out as a key feature of the new lending platform. By borrowing against Bitcoin rather than selling it, users may avoid immediate capital gains events, potentially creating more favorable tax situations for those seeking to access liquidity.
The borrowed USDC comes with multiple use cases. Users can convert it to US dollars without fees, use it for major purchases, or earn rewards exceeding 4% while holding the stablecoin. The ability to send USDC globally without additional costs adds another layer of utility to the borrowed funds.
Morpho’s involvement brings substantial credibility to the program. The protocol has established itself as a major player in decentralized finance, securing its position as the 12th-largest DeFi application with over $3.2 billion in locked value during 2024.
The launch builds upon Coinbase’s earlier introduction of cbBTC in September. Since then, cbBTC has accumulated impressive numbers, with supply reaching $2.1 billion, representing over 21,495 Bitcoin according to recent Dune Analytics data.
Community reaction to the lending service has revealed diverse perspectives. While many users welcome the additional financial flexibility, others have expressed reservations about certain aspects of the program’s structure and implementation.
The auto-liquidation feature has emerged as a point of discussion within the crypto community. This mechanism, which can trigger if Bitcoin’s value falls below certain thresholds, has prompted some users to emphasize the importance of careful position management.
Questions about centralization have surfaced in community discussions. The use of cbBTC and Coinbase’s role as an intermediary has led some decentralization advocates to debate whether the service aligns with core DeFi principles.
The variable nature of the interest rates has also drawn attention from potential users. With rates adjusting frequently based on market conditions, borrowers must carefully consider how rate fluctuations might affect their borrowing strategy.
Some technical experts within the crypto space have analyzed the loan structure’s complexity. The process of converting Bitcoin to cbBTC and utilizing Ethereum-based DeFi protocols has generated discussion about the technical aspects of the implementation.
The service requires users to actively monitor their loan-to-value ratios to maintain healthy positions and avoid liquidation events. This requirement has sparked conversations about risk management and the importance of understanding market volatility when using crypto-backed loans.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support