LONDON, ENGLAND – Coinbase has relaunched its Bitcoin-backed loan service for U.S. customers after discontinuing it in July 2023 due to low demand. This revival leverages decentralized finance (DeFi) technology through Morpho, an Ethereum and Base-based protocol, marking a strategic shift toward safer, overcollateralized lending solutions.
How the New BTC-Backed Loan Service Works
Key features of Coinbase’s reintroduced service include:
- Loan Amounts: Borrow up to $100,000 in USDC stablecoins using Bitcoin as collateral.
- Collateralization: Loans are overcollateralized via DeFi protocols, reducing default risks.
- Platform Control: Coinbase maintains oversight through Morpho’s infrastructure, avoiding the volatility of decentralized autonomous organizations (DAOs).
"Bitcoin-backed loans are here. Borrow USDC against bitcoin, without selling it. The future of finance is onchain."
— Coinbase (@coinbase)
Why This Relaunch Matters
1. Market Timing
The crypto market has rebounded strongly, with Bitcoin surpassing $100,000 in late 2024. This rally, fueled by regulatory optimism under the Trump administration, renews interest in crypto-backed financial products.
2. DeFi Integration
By partnering with Morpho, Coinbase mitigates risks associated with traditional centralized lending, such as those seen in the 2022 collapses of Celsius and BlockFi.
3. User Liquidity
With billions in Bitcoin held by Coinbase users, this service unlocks liquidity without requiring asset sales, appealing to long-term holders.
Regulatory and Availability Notes
- Available: All U.S. states except New York (due to local regulations).
- Compliance: Coinbase addresses past SEC concerns by using DeFi frameworks, though oversight remains stringent.
FAQs
Q1: What’s the maximum loan-to-value (LTV) ratio?
A: Details are unspecified, but DeFi loans typically require collateral exceeding the loan value (e.g., 150% collateralization).
Q2: How does this differ from Coinbase’s previous loan program?
A: Earlier versions allowed borrowing up to $1M against 30% of BTC holdings but faced SEC scrutiny. The new model uses DeFi to decentralize risk.
Q3: Is USDC stablecoin safe?
A: Yes, USD Coin is fully backed by U.S. dollar reserves, with its market cap growing 79% since 2022.
👉 Learn About Crypto Collateralization
Looking Ahead
Coinbase’s reentry into crypto lending signals confidence in Bitcoin’s liquidity utility and DeFi’s maturation. As regulatory clarity improves, such services could bridge traditional finance and blockchain ecosystems.