Coinbase has recently announced a new partnership with money market Morpho on Jan. 16, to offer on-chain USD Coin (USDC) loans backed by Bitcoin (BTC). This collaboration will enable Coinbase users to borrow USDC by pledging Bitcoin as collateral. The loans will be processed through the layer-2 blockchain Base. The pledged collateral will automatically be converted to Coinbase Wrapped Bitcoin (cbBTC) on a 1:1 basis and then transferred to Morpho.
Users will have access to borrow up to $100,000 in USDC, with interest rates determined dynamically by Morpho’s market-driven mechanism. One of the key features of this service is the flexibility it offers with no fixed repayment schedule. However, users must keep an eye on their loan-to-value ratio to prevent liquidation in case the collateral’s value drops.
Morpho has seen impressive growth, becoming the 12th-largest decentralized application by total value locked, with over $3.2 billion in 2024, showing a 444% increase, according to DefiLlama data.
Coinbase’s venture into DeFi tools, such as this partnership, demonstrates the firm’s commitment to expanding its reach in the decentralized finance space. By allowing users to convert borrowed USDC to US dollars for free, Coinbase aims to bridge the gap between traditional financial tools and the crypto market.
This service can also serve as a tax-efficient alternative to selling Bitcoin, enabling users to potentially defer capital gains or losses. Investors looking to unlock liquidity without triggering taxable events may find this aspect appealing.
Following the launch of cbBTC in September, which allowed customers to move Bitcoin into on-chain environments, the service has been gaining traction. According to a Dune Analytics dashboard created by user eekeyguy, cbBTC has surpassed $2.1 billion in supply, equivalent to 21,495.46 BTC. Meanwhile, Wrapped Bitcoin (WBTC) experienced a 13.4% decrease in supply over the same period, although its market size remains over 132,000 BTC.
Overall, Coinbase’s collaboration with Morpho highlights the growing importance of DeFi tools in the crypto industry and signifies a significant step towards innovation and expansion within this space.
