Coinbase Launches Bitcoin-Backed Loans With Rewards and Flexible Repayment Options

Coinbase now lets users borrow up to $100,000 in USDC without selling bitcoin, offering flexible repayment, tax advantages, and instant access to funds via its streamlined platform.

Borrow USDC Without Selling Bitcoin: Coinbase Introduces New Loan Feature

Crypto exchange

Coinbase (Nasdaq: COIN) announced on Thursday the introduction of bitcoin-backed loans, enabling customers to borrow stablecoin USDC without selling their bitcoin holdings. Available in U.S. states except New York, the loans are facilitated by Morpho, a permissionless, non-custodial lending protocol on Ethereum and Base, Coinbases Ethereum Layer 2 blockchain, designed to enhance scalability and efficiency for decentralized applications.

Highlighting the features convenience, Coinbase explained: “In under a minute, you can get a loan in USDC without ever having to sell your bitcoin. You can earn over 4% in USDC rewards, send USDC globally for free, and use it onchain. You can also convert USDC to USD 1:1 for free to cover major expenses like buying a car or making a downpayment on your mortgage.” Coinbase also noted its plans to expand both assets and geographic availability, stating:

We are starting with bitcoin as collateral, with plans to add more assets in the future. Crypto-backed loans are available to customers starting in the U.S., excluding New York State, with plans to expand to more markets.

The borrowing process is streamlined for simplicity and speed. Users pledge their BTC as collateral, which is automatically converted to Coinbase Wrapped Bitcoin (cbBTC) and transferred onchain to Morpho. Customers can borrow up to $100,000 in USDC, depending on their bitcoin holdings, and receive funds almost instantly.

Coinbase emphasized the potential tax benefits of retaining bitcoin while borrowing against it, stating:

Borrowing against bitcoin instead of selling it can help delay a tax gain or loss.

Repayment terms for the loans are flexible, with no fixed schedule. However, liquidation occurs if the collaterals value falls below a specific threshold relative to the loan amount. Users can monitor their loan status directly through the Coinbase app. By utilizing the scalability of Base and the innovative capabilities of onchain finance, Coinbase aims to redefine access to secure and efficient financial solutions for its customers.