Coinbase and Morpho Team Up to Offer On-Chain USDC Loans Backed by Bitcoin

The service will allow Coinbase users to borrow USDC by pledging Bitcoin as collateral. Loans are processed through the layer-2 blockchain Base.

Coinbase users can now borrow USD Coin (USDC) against their Bitcoin (BTC) holdings in a move that further integrates decentralized finance (DeFi) tools into the exchange’s ecosystem.

The service, announced by Coinbase on Jan. 16, allows users to obtain USDC loans at rates determined by a market-driven mechanism. The loans are processed through Base, a layer-2 blockchain for Ethereum.

Coinbase’s initiative marks a significant development in DeFi integration, highlighting the growing importance of decentralized financial instruments. The exchange aims to bring traditional financial tools into the crypto market with this service.

According to Coinbase, users can convert the borrowed USDC to fiat currencies like the U.S. dollar for free, enabling them to access funds without incurring additional fees.

This service is also touted as a tax-efficient alternative to selling Bitcoin, as it may allow users to postpone realizing capital gains or losses. Investors seeking to unlock liquidity without triggering taxable events may find this aspect particularly appealing.

Coinbase’s latest offering adds to the exchange’s efforts to integrate DeFi protocols. In September, Coinbase announced the launch of Coinbase Wrapped Bitcoin (cbBTC), which allows users to move their Bitcoin into on-chain environments.

Data from a Dune Analytics dashboard shows that cbBTC supply has crossed the 21,000 BTC mark as of Jan. 16, indicating strong demand for the on-chain variant. During the same period, the total supply of Wrapped Bitcoin (WBTC) decreased by 13.4%.