In recent developments, Coinbase has rolled out bitcoin-backed loans, giving users an easy way to borrow USDC without selling their bitcoin. This feature, which is gradually being introduced over the next few months, offers competitive interest rates and flexible repayment terms. Powered by the open-source Morpho lending protocol built on the Base blockchain, these loans are available to customers in the U.S. (except New York), with plans to expand to more locations.
Bitcoin-Backed Loans Made Easy
Now, borrowing USDC with your bitcoin as collateral has never been faster or simpler. Within just a minute, you can access a loan in USDC without needing to sell your bitcoin. By doing so, you can also take advantage of over 4% rewards in USDC, send USDC globally for free, and even convert it to USD at a 1:1 rate at no additional cost. This makes it an excellent option for covering big expenses like buying a car or making a downpayment on a house.
One of the advantages of this loan model is the ability to avoid realizing a tax gain or loss, as you’re borrowing against your bitcoin rather than selling it. The loans are facilitated by Morpho, which uses a decentralized open-market lending pool to offer competitive interest rates that vary based on market conditions.
Innovating Personal Finance On-Chain
These bitcoin-backed loans are a significant step forward in using blockchain technology for everyday financial needs. Coinbase’s integration of Morpho and the Base blockchain enables a smoother, more intuitive user experience. This also brings customers closer to the benefits of decentralized finance (DeFi) in a way that feels natural and easy to use.
For example, when you take out a loan, your bitcoin collateral is automatically converted into Coinbase Wrapped Bitcoin (cbBTC) at no extra cost. cbBTC is a tokenized version of bitcoin that can be used on-chain. This allows you to leverage the value of your bitcoin without having to leave the Coinbase platform. Your loan is powered by Morpho’s protocol, providing access to USDC—the stablecoin that brings real utility to crypto-backed loans.
How to Get Started
It’s quick and simple to get a loan through Coinbase. To begin, just open the app, go to the “Cash” tab, click on “Borrow,” and enter the amount of USDC you want to borrow against your bitcoin. Depending on the amount of bitcoin you pledge, you can borrow up to $100,000 USDC.
Once you confirm your loan amount, the bitcoin you’ve chosen as collateral will be automatically converted into cbBTC and sent to a Morpho smart contract. Then, the loan amount will be disbursed to your Coinbase account almost instantly.
Flexible Loan Terms and Repayment
Interest rates for these loans are variable and adjust in real-time based on market conditions. There is no fixed repayment schedule, offering you flexibility in deciding when and how much to repay. However, if your loan’s value—including accrued interest—reaches a specific threshold compared to the value of your collateral, a liquidation will occur. You can easily keep track of your loan status through the Coinbase app.
More Information
For more details on crypto-backed loans, you can visit the official Coinbase loan page.
Disclaimer
Please note, Coinbase does not treat the USDC rewards mentioned here as a securities offering. The rewards rate is subject to periodic adjustments. Additionally, while there are no commissions charged by Coinbase, third-party fees may apply for processing payments. The availability of USDC and the 1:1 conversion feature may not be accessible in all regions.
This article is for informational purposes only and does not offer financial or legal advice. Before making any decisions, it’s recommended to consult with your personal financial advisors.
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