Coinbase to Offer Bitcoin-Backed Loans Through Morpho

Coinbase to Offer Bitcoin-Backed Loans Through Morpho

Coinbase Launches Bitcoin-Backed Loans in U.S. Through Morpho Platform

Coinbase is expanding its U.S. product offerings with bitcoin-backed loans, utilizing the Morpho platform, which is the largest lending service on Coinbase’s Base network. This new feature allows users to borrow funds by posting bitcoin as collateral rather than relying on credit scores, marking a significant shift in how lending operates within the crypto space.

Unlike traditional bank loans, which typically use credit scores to assess borrowers, Coinbase's new system eliminates the need for a credit check. Instead, borrowers are required to post substantial collateral, often exceeding the loan amount, to secure their loan. This model mitigates the risk of bad debt by ensuring that lenders are covered in the event of a default. The system is particularly suited for the crypto market, where assets are highly volatile and traditional credit scoring is not applicable.

With this update, Coinbase has made borrowing more accessible by integrating Morpho’s borrowing functionality directly into its popular user interface, removing previous barriers to entry. This integration into the Coinbase platform could drive significant user engagement and attract more capital into the on-chain economy.

Max Branzburg, Coinbase’s Head of Consumer Products, emphasized the importance of the move, stating, "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."

Each loan on Coinbase’s platform is capped at $100,000 in USDC, and to borrow this amount, users will need to deposit an equivalent or greater amount in bitcoin as collateral. If the value of the collateral begins to fall too close to the loan amount, Morpho will initiate liquidation to protect against defaults. Coinbase will provide users with liquidation warnings through its app to help them manage their positions.

The new loan offering caters to crypto traders who typically hold large amounts of digital assets but prefer not to sell them. Instead, they can use their holdings as collateral to fund other ventures, such as risky trades or even larger personal expenses like buying a car or paying for a home. Coinbase’s integration of Morpho-backed loans further strengthens its ecosystem by adding a new service to its front end while simultaneously creating demand for its stablecoin, USDC, and its wrapped bitcoin product, cbBTC.

Overall, this development continues to enhance Coinbase’s on-chain economy, feeding into the company's broader growth strategy while offering a more flexible borrowing option to crypto users.