Coinbase (COIN) is adding bitcoin-backed loans to its U.S. product lineup, leveraging Morpho, the largest lending platform in its Base network, to draw eyes and wallets to its booming on-chain economy. growth.
The lending product is not completely new: those used to playing on Base have long been able to borrow USDC against their bitcoin on Morpho or through other DeFi services. What’s new here is easy access: Coinbase integrates Morpho’s borrowing books into its own popular user interface, removing a critical barrier to entry.
“This is the moment where we plant the flag of Coinbase coming to the chain, and we bring millions of users with their billions of dollars,” said Max Branzburg, head of consumer products at Coinbase.
Personal loans in the on-chain world are fundamentally different from the predominant loan offerings offered by banks and lenders. These pillars of the ordinary economy rely on borrowers’ credit scores to decide whether to grant a loan and determine its terms, whether the loan is secured or unsecured.
But credit scores are not about crypto. Platforms like Morpho do not need to assess the value for money of their borrowers. Instead, they require their borrowers to provide extensive collateral; much more, in fact, than the amount they seek to borrow. This configuration protects platforms against bad debts from defaulters.
Coinbase’s setup caps each borrow at $100,000 in USDC. To borrow that much money, customers will need to post more than that amount of bitcoin. Morpho will begin liquidating the collateral if the loan-to-value ratio gets too close to the sun.
“If price fluctuations reach a dangerous point, we will share liquidation warnings through the Coinbase app so you are aware and can take action,” Branzburg said.
Borrowing money is the basis of all financial services, but it has an added attraction for crypto traders who often have tons of tokens that they refuse to sell. These traders often take out loans to operate airdrops and finance other risky transactions. In Coinbase’s view, Morpho-facilitated loans could help borrowers pursue perhaps nobler endeavors, like buying a car or paying off a house.
Under the hood, the new setup powers the Coinbase flywheel every step of the way. First, the deployment adds new capability to the Coinbase interface. Second, users who post BTC collateral issue cbBTC (Coinbase’s wrapped bitcoin on Base) and borrow USDC (Coinbase’s stablecoin). Third, all of this happens on Morpho (a Coinbase-funded lending platform) on top of Base (Coinbase’s Layer 2 network).
