Coinbase (COIN) has introduced bitcoin-backed loans to its U.S. product lineup, leveraging Morpho, the leading lending platform on its Base network, to attract users and expand its on-chain economy.
The lending product is not entirely new. Base users have long been able to borrow USDC against their bitcoin on Morpho or other DeFi services. Coinbase's integration of Morpho's borrow books into its user interface simplifies access, removing a significant barrier to entry.
Coinbase's loan setup differs from traditional lending practices. Instead of relying on credit scores, borrowers post substantial collateral, exceeding the borrowed amount. This collateral-based approach protects the platform from bad debt.
Each loan is capped at $100,000 in USDC, requiring borrowers to post more than that amount in bitcoin. Morpho will initiate collateral liquidation if the loan-to-value ratio approaches a critical threshold.
Coinbase believes these loans will appeal to crypto traders holding tokens they are reluctant to sell. Borrowers can utilize the loans for various purposes, including airdrop farming, risky trades, and even traditional expenses like car or house purchases.