Coinbase expands crypto credit with new ETH-backed loans

Coinbase has recently introduced a new lending service that allows eligible U.S. customers to borrow against their Ethereum holdings. This innovative feature enables users to access loans of up to $1 million in USDC without the need to sell their ETH. This move highlights Coinbase's commitment to expanding its offerings in the cryptocurrency space.

Coinbase launches new service for Ethereum-backed loans up to $1 million

The launch of Ethereum-backed loans marks one of Coinbase's most significant ventures into decentralized finance (DeFi) integration to date. Prior to this, the company had increased its Bitcoin-backed loan limit to $5 million just weeks earlier, reflecting its growing focus on providing diverse borrowing options to its users.

Service integrates decentralized finance through Morpho protocol on Base network

This new loan program operates through Morpho, a lending protocol built on Base, which is Coinbase's Layer 2 solution. In this arrangement, Coinbase acts as the user interface, while the actual loan transactions are managed through Morpho's smart contracts. This setup allows users to tap into the liquidity offered by decentralized finance while navigating a familiar centralized platform.

Users can borrow without selling ETH, avoiding taxable events

The service is available in most states across the U.S., though New York residents are excluded due to regulatory constraints. Users can deposit their ETH as collateral to obtain USDC, which is a significant advantage since it does not trigger a taxable event, unlike selling cryptocurrency directly. However, borrowers are required to keep their loan-to-value ratio below 86%. If this threshold is breached, their positions may be automatically liquidated, reflecting the volatility associated with cryptocurrency prices.

Coinbase strengthens its position in the growing cryptocurrency credit market

As on-chain lending activity within the Base ecosystem exceeds $1.25 billion, the increase in both institutional and retail credit market participation is evident. Morpho has seen substantial inflows recently as users—ranging from traders to long-term holders—leverage collateralized borrowing to access liquidity while retaining their cryptocurrency investments. This expansion not only enhances Coinbase's product offerings but also solidifies its role in the rapidly evolving crypto-native credit market.