Bitcoin-Backed Loans for USDC Borrowing
Coinbase has launched a Bitcoin-backed loan service through the decentralized finance protocol Morpho, available on the Coinbase-incubated Ethereum Layer 2 network, Base. Customers can borrow up to $100,000 in USDC by using their Bitcoin holdings as collateral. The move allows users to access liquidity without selling their Bitcoin, appealing to those seeking flexibility in managing their crypto assets.How the Loan System Works
When a customer opts for a loan, Coinbase converts their Bitcoin into Coinbase-wrapped Bitcoin (cbBTC) at no cost. The cbBTC is deposited into Morpho, which disburses USDC to the user’s Coinbase account in less than a minute. Loans are over-collateralized, requiring a minimum collateralization ratio of 133%.Flexible Terms with Market-Driven Interest
Interest rates are dynamically adjusted by Morpho based on market conditions, varying with every new block created on the Base blockchain. Borrowers enjoy flexible repayment terms with no fixed schedules, as long as they maintain a healthy loan-to-value (LTV) ratio to prevent collateral liquidation.Risk Management and Expansion Plans
If a loan’s balance reaches 86% of the collateral's value, the system triggers an automatic liquidation, returning any remaining Bitcoin to the user after covering the loan and associated penalties. Coinbase plans to expand the service beyond the U.S. (excluding New York) and intends to include additional cryptocurrencies as eligible collateral in the future.
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