Coinbase launches Bitcoin-backed loans through Morpho DeFi partnership
Cryptocurrency exchange Coinbase has introduced Bitcoin-backed loans in the United States, giving users the ability to borrow against their digital asset holdings.
The new product line allows US account holders, excluding New York residents, to borrow up to $100,000 in USD Coin (USDC) against their Bitcoin (BTC) holdings as collateral. Only BTC held on Coinbase is eligible for the loan.
Coinbase has tapped the decentralized financial protocol Morpho Labs to facilitate the lending process, which runs entirely on Base, the exchange's Ethereum layer-2 network.
Coinbase CEO Max Branzberg told Cointelegraph that the new product demonstrates the exchange's “commitment to economic freedom” and that “crypto-backed loans allow our customers to do more with Bitcoin, and we're making it happen on-chain.”
A table showing the difference between secured and unsecured crypto loans. Source: Cointelegraph
A representative of Coinbase Communications explained to Cointelegraph that the exchange “provides an easy way to access this loan market and has no direct involvement with the loan.”
“Users can tap into competitive interest rates without Coinbase fees or credit checks and repay their loans on their own terms with flexible repayment terms,” the representative said.
The new product line marks Coinbase's second entry into the Bitcoin lending market. In May 2023, the exchange announced that it would end its lending program, which allowed users to get cash loans backed by BTC holdings. The program officially closes on November 20, 2023.
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Demand for Bitcoin-backed loans is heating up
Bitcoin-backed loans allow them to access capital without having to sell their holdings — a critical feature for individuals looking to protect their wealth and avoid large tax bills.
Borrowing against assets is a practice that wealthy families have used for generations. Also known as “borrow, borrow, die”, this strategy allows the wealthy to take out asset-based loans permanently.
The rising price of Bitcoin has left many early owners with newfound wealth. As a result, the market for Bitcoin-backed loans may increase in the coming years.
According to HFT Market Intelligence, the market value of Bitcoin-backed loans could grow from $8.5 billion in 2024 to $45 billion in 2030.
As more institutions enter the crypto lending space, companies like Lead are trying to facilitate a simpler process. Source: Led
The growing adoption of Bitcoin has also encouraged more financial institutions to enter the crypto lending market. Bitcoin-backed lending protocol Ledn told Cointelegraph that major institutions are moving beyond cryptocurrency exchanges and into the crypto lending business.
Related: Alo Secures $100M Bitcoin-Backed Credit Facility
