Coinbase has launched a major upgrade to its crypto-lending services, enabling U.S. users (excluding New York residents) to borrow up to $1 million in USDC using their Ethereum as collateral. This capability is powered by Morpho Labs’ on-chain lending infrastructure, and it represents an important step toward mainstream access to decentralized finance (DeFi) via a trusted exchange.
The initiative ties together four critical trends: demand for liquidity without selling crypto, institutional-grade DeFi infrastructure, user-friendly platforms, and evolving regulatory comfort around crypto-backed loans.
Borrowers pledge Etherum (ETH) which is converted into Coinbase Wrapped Ethereum (cbETH) on Base, Coinbase’s layer-2 blockchain. The cbETH is then deposited into a Morpho smart contract as collateral.
In exchange, users receive USDC in their Coinbase account almost instantly. The loan product is integrated directly into the Coinbase mobile app, removing the user-experience friction common in traditional DeFi protocols.
The maximum borrowing amount stands at $1 million USDC per user, depending on collateral value and eligibility.
There are no fixed repayment schedules or deadlines—borrowers can repay any time. The key constraint is maintaining a healthy loan-to-value (LTV) ratio. If the outstanding loan amount including interest reaches approximately 86% of the collateral’s value, the position can be liquidated.
Rates are variable and determined by the open lending market on Morpho, and as part of Coinbase’s interface the process is designed to feel familiar to users of mainstream financial apps.
A major advantage of this offering is that users retain exposure to their underlying crypto holdings while accessing cash liquidity. This can help avoid tax-triggering events that might come from selling crypto assets, while still unlocking value for things like down payments, major purchases, or diversifying other investments.
Coinbase is leveraging Morpho’s protocol layer so that the decentralized lending infrastructure handles execution and risk, while Coinbase manages the user interface, onboarding, and regulatory overlay. This model blends DeFi innovation with the user experience and brand trust of a regulated exchange.
Crypto-backed loans have a checkered history, with industry failures in recent years (for example, centralized lenders filing for bankruptcy). This time, Coinbase and Morpho appear to be building with lessons learned: a trusted exchange interface, modern risk controls, transparent collateral mechanics, and clear liquidation thresholds. The exclusion of New York is a nod to continuing regulatory variations across jurisdictions but demonstrates broader U.S. availability.
Morpho reports that its protocol supports billions in locked liquidity and has enabled institutions and exchanges to offer lending services in a modular, compliant way.
One source places the collective crypto-backed loan market at over $1 billion already in a short period, driven by this Coinbase-Morpho product and similar initiatives.
Earlier versions of Coinbase’s lending offering were closed suddenly amid regulatory issues, so this relaunch signals renewed confidence in design, oversight, and market timing.
The Base blockchain integration gives the service lower cost, faster transactions and more seamless experience compared to older DeFi on-ramps, improving accessibility for mainstream users.
Volatility risk: If Ethereum’s price drops significantly, borrowers may face liquidation if the collateral value falls and the loan-to-value ratio breaches thresholds.
Liquidity and contract risk: While Morpho is audited and established, smart contract protocols always carry some risk of bugs, hacks or operational failure.
Regulatory change: Although the product is live, evolving regulation in the U.S. could alter lending terms, disclosure obligations or tax treatments tied to crypto-backed loans.
Cost of borrowing: Rates are variable and market-driven; high demand or collateral stress could increase borrowing costs unexpectedly.
User experience vs. risk exposure: The seamless interface may mask underlying complexity; users still need to monitor LTV, collateral status and market conditions.
The introduction of high-limit crypto-backed loans via a mainstream exchange opens the door for wealthy and institutional crypto holders to access large liquidity without asset sales, blurring lines between traditional finance and DeFi.
This offering may accelerate use cases where holding crypto is strategic (for tax or value appreciation reasons) while accessing fiat liquidity for spending, investing or diversification.
If this model succeeds, more exchanges may follow, and lending protocols may become core infrastructure rather than niche DeFi tools—potentially reshaping the financial profile of crypto markets.
Coinbase’s collaboration with Morpho to offer up to $1 million in USDC loans backed by Ethereum is more than a product launch. It is a signal that crypto infrastructure is maturing from experimental protocols to user-friendly, high-scale financial services.
For crypto holders, it offers a new pathway to liquidity without sacrificing exposure. For the broader market, it shows that DeFi protocols and mainstream exchanges can integrate to deliver real-world services.
The key will be execution, risk control, user adoption and regulatory acceptance. If all elements align, this could mark a pivotal moment where crypto-native finance moves into mainstream modes and the borrowing-against-assets model becomes widely accessible.
Stay tuned as this space evolves, products like this may become standard components in how we finance, borrow and invest in the crypto age.
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