Coinbase Lets Users Borrow $100K USDC With Bitcoin As Collateral: Details

Coinbase launches Bitcoin-backed loans, allowing users to borrow up to $100K USDC using Bitcoin as collateral via the Morpho protocol.
By Ronny Mugendi
Coinbase Files Amicus Brief To Protect Customers In Prime Trust Bankruptcy

Highlights

  • Coinbase users can borrow up to $100,000 USDC instantly by pledging Bitcoin as collateral via DeFi protocol Morpho.
  • Loans are secured by converting Bitcoin into cbBTC, a wrapped token, enabling decentralized finance functionality on Base.
  • Borrowers face no fixed repayment schedule but risk liquidation if Bitcoin's value falls below safe collateral levels.

.

Advertisement
Advertisement

Coinbase Rolls Out Bitcoin-Backed Loans Powered by Morpho Protocol

Recently, the Coinbase crypto exchange has started a new loan service where users can borrow up to $100,000 USD Coin (USDC) with Bitcoin as collateral. These loans are enabled by the service through the use of Morpho, a DeFi protocol on the Base blockchain. This integration is a step in the exchange’s efforts to merge traditional financial services with DeFi.

More so, Bitcoin pledged by users is converted into cbBTC, a wrapped version of BTC created by Coinbase. This wrapped token enables Bitcoin to function seamlessly within decentralized finance systems. By utilizing cbBTC, Coinbase ensures that the collateral remains compatible with Morpho’s lending platform. This provides users with access to liquidity without the need to liquidate their Bitcoin holdings.

Meanwhile, in the SEC vs. Coinbase case, Binance has filed a joint notice to the district court, using the partial win that Coinbase received in the rulemaking petition lawsuit. Binance is planning to use this judgment to have the US SEC’s claims dismissed. The exchange further notes that the SEC’s complaint does not satisfy the Howey test.

Advertisement
Advertisement

How the Loan Process Works

Notably, Coinbase users can initiate a loan by pledging their Bitcoin as collateral through the Coinbase app. Once the Bitcoin is pledged, it is converted to cbBTC at a 1:1 ratio and transferred to the Morpho DeFi protocol. In return, borrowers receive USDC loans directly into their Coinbase accounts within seconds, allowing for quick access to funds.

Additionally, the process streamlines efficiency and ensures user convenience. Coinbase charges no fees for converting Bitcoin to cbBTC, and it completes the entire transaction on-chain. Users can utilize the borrowed USDC for various purposes, including expenses, transfers, or converting it into U.S. dollars.

Advertisement
Advertisement

Flexible Repayment Terms and Risk Management

However, if Bitcoin’s value decreases, the exchange will liquidate the collateral to cover the loan.. This mechanism ensures that the loan remains secure and the exchange can manage risks associated with BTC volatility. 

At the moment, Coinbase’s Bitcoin-backed loan service is only available in the United States but not in New York. For the initial collateral, Coinbase has adopted Bitcoin but plans to incorporate other digital currencies in subsequent versions.

Additionally, the crypto exchange has continued to expand its offerings, recently adding Peanut the Squirrel (PNUT) meme coin on the Solana network. PNUT will be available for trading on the exchange starting this January, with the trading pair PNUT-USD launching in phases.

Advertisement
Ronny Mugendi
Ronny Mugendi is a seasoned crypto journalist with four years of professional experience, having contributed significantly to various media outlets on cryptocurrency trends and technologies. With over 4000 published articles across various media outlets, he aims to inform, educate and introduce more people to the Blockchain and DeFi world. Outside of his journalism career, Ronny enjoys the thrill of bike riding, exploring new trails and landscapes.
Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.