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

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

Coinbase has unveiled an innovative feature allowing users to borrow up to $100,000 in USDC without selling their bitcoin holdings. This service provides flexibility, tax advantages, and instant access to funds, revolutionizing how users manage their cryptocurrency assets.

Borrow USDC Without Selling Bitcoin

On Thursday, Coinbase (Nasdaq: COIN) announced the introduction of bitcoin-backed loans, enabling customers to use their bitcoin as collateral to borrow USDC. This service is currently available across the United States, excluding New York, and is facilitated by Morpho—a permissionless, non-custodial lending protocol on Ethereum and Base, Coinbase’s Ethereum Layer 2 blockchain.

Key Features and Benefits

1. Instant Access to Funds: Customers can secure a loan in USDC in under a minute without selling their bitcoin. Borrowers can use the funds onchain, convert USDC to USD 1:1 for free, or transfer it globally without fees.

2. Earn Rewards: Users earn over 4% in USDC rewards, enhancing the utility and benefits of borrowing.

3. Tax Advantages: By borrowing against bitcoin instead of selling it, users can defer tax implications, avoiding immediate gains or losses.

Streamlined Loan Process

The borrowing process is designed for simplicity and efficiency:

• Users pledge their bitcoin as collateral.

• Bitcoin is converted to Coinbase Wrapped Bitcoin (cbBTC) and transferred onchain to Morpho.

• Loans of up to $100,000 in USDC are disbursed almost instantly, depending on the pledged bitcoin’s value.

Customers can monitor their loan status through the Coinbase app and enjoy flexible repayment terms with no fixed schedule. However, liquidation occurs if the collateral’s value drops below a specific threshold.

Plans for Expansion

Currently, bitcoin is the only collateral option, but Coinbase has plans to expand the service by adding more assets and extending availability to additional markets. The company aims to leverage the scalability of Base and onchain finance to deliver secure and efficient financial solutions globally.