Home Coinbase offers Bitcoin-backed loans to U.S. users again

Coinbase offers Bitcoin-backed loans to U.S. users again

Publicly-traded United States-based cryptocurrency exchange Coinbase is offering Bitcoin-backed (BTC) loans to its U.S. users once again.

Eligible United States-based customers — which excludes New York residents — can borrow up to $100,000 in the USD Coin (USDC) stablecoin from Coinbase while leveraging their Bitcoin holdings as collateral, according to a recent announcement. In order to qualify as collateral, the Bitcoin need to be kept on the exchange.

In an X post, Coinbase explained that the firm planned to add support for more collateral assets in addition to Bitcoin. The company also explained that the service is powered by lending protocol Morpho Labs built on Coinbase’s Ethereum (ETH) layer two Base.

Coinbase does provide an interface to access Morpho’s decentralized lending protocol, but it does nto directly manage the lending itself. The exchange exclaimed: “The future of finance is onchain.

The details

In order to use the new service, Coinbase users need to convert their Bitcoin into the exchange’s wrapped Bitcoin token cbBTC. Then, users can use this token — which is redeemable for Bitcoin — in the decentralized finance (DeFi) protocol Morpho and take a loan for USDC.

Unlike traditional loans, Morpho Bitcoin-backed loans do not have a fixed repayment schedule. Users can repay at their own leasure while obtaining the capital that they need without selling their Bitcoin investments.

An issue for the user arises if Bitcoin’s price falls enough for it not to meet the loan’s collateral requirements. In such cases the Bitcoin holdings are liquidated and the loan is considered repaid with any collateral remaining after repayment being returned to the user. Consequently, users need to frequently check their loan’s collateralization to avoid liquidation.

Coinbase previously offered crypto-backed loans under service name “Lend,” until it had to halt the service in 2023 due to regulatory pressure from the United States Securities and Exchange Commission (SEC). At the time, Coinbase published a post with title “the SEC has told us it wants to sue us over Lend. We don’t know why.” The post reads:

“Coinbase’s Lend program doesn’t qualify as a security — or to use more specific legal terms, it’s not an investment contract or a note. Customers won’t be “investing” in the program, but rather lending the USDC they hold on Coinbase’s platform in connection with their existing relationship.”

About ReadWrite’s Editorial Process

The ReadWrite Editorial policy involves closely monitoring the tech, gambling and blockchain industries for major developments, new product and brand launches, AI breakthroughs, game releases and other newsworthy events. Editors assign relevant stories to in-house staff writers with expertise in each particular topic area. Before publication, articles go through a rigorous round of editing for accuracy, clarity, and to ensure adherence to ReadWrite's style guidelines.

Adrian Zmudzinski is a cryptocurrency journalist with over 4,000 articles under his belt. His bylines include Cointelegraph, Benzinga, Crypto.News, and BeInCrypto.

Get the biggest tech headlines of the day delivered to your inbox

    By signing up, you agree to our Terms and Privacy Policy. Unsubscribe anytime.

    Tech News

    Explore the latest in tech with our Tech News. We cut through the noise for concise, relevant updates, keeping you informed about the rapidly evolving tech landscape with curated content that separates signal from noise.

    In-Depth Tech Stories

    Explore tech impact in In-Depth Stories. Narrative data journalism offers comprehensive analyses, revealing stories behind data. Understand industry trends for a deeper perspective on tech's intricate relationships with society.

    Expert Reviews

    Empower decisions with Expert Reviews, merging industry expertise and insightful analysis. Delve into tech intricacies, get the best deals, and stay ahead with our trustworthy guide to navigating the ever-changing tech market.