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Coinbase Reinvents Crypto Loans With Bitcoin Collateral

Coinbase has unveiled a new service for U.S. customers that allows borrowing against Bitcoin holdings, offering a seamless way to access liquidity without selling their assets. While New York residents are excluded, users across other states can secure loans in USDC, a stablecoin, backed by their Bitcoin investments.

The process ensures instant disbursement of funds, competitive interest rates, and flexible repayment terms. Powered by Morpho, an open-source lending protocol running on Coinbase’s Layer-2 blockchain Base, this service leverages decentralized finance to provide a dynamic and efficient lending experience.

When users pledge Bitcoin as collateral, it is automatically converted into Coinbase Wrapped Bitcoin (cbBTC) at a 1:1 ratio. This cbBTC remains within Coinbase’s ecosystem and is used as collateral through Morpho’s lending pool. The introduction of cbBTC in September paved the way for Bitcoin to be more functional in on-chain transactions, adding utility for Coinbase customers.

Loans are capped at $100,000 USDC per user, based on the value of the Bitcoin collateral. Interest rates, which fluctuate in real-time with blockchain activity, adapt to market conditions dynamically. Users can repay their loans at their own pace while monitoring their balances through the Coinbase app. However, should the loan balance, including accrued interest, exceed a specific threshold in relation to the collateral, liquidation will be triggered to mitigate risk.

One of the standout features of this offering is the tax advantage. Borrowing against Bitcoin, rather than selling it, allows users to delay capital gains or losses, making the service appealing to those focused on long-term financial growth.

Coinbase views this product as a key step toward providing “vastly improved financial services,” blending traditional financial tools with blockchain technology. The company emphasizes the value of decentralization, transparency, and accessibility in empowering users to maintain greater control over their finances.

This service bridges the gap between cryptocurrency investments and immediate financial needs, offering a way for users to leverage their holdings without compromising their future potential. It highlights Coinbase’s ongoing mission to combine innovation with practicality in the rapidly evolving crypto landscape.

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