Coinbase Partners with Morpho to Offer On-Chain USD Coin (USDC) Loans Backed by Bitcoin (BTC)
Partnership Details
Coinbase, a leading cryptocurrency exchange, has announced a partnership with money market Morpho to offer on-chain USD Coin (USDC) loans backed by Bitcoin (BTC). According to a January 16 release, the service will allow Coinbase users to borrow USDC by pledging Bitcoin as collateral.
The collateral is automatically converted to Coinbase Wrapped Bitcoin (cbBTC) on a 1:1 basis and then transferred to Morpho. Borrowers can access up to $100,000 in USDC, with interest rates determined dynamically by Morpho’s market-driven mechanism.
On-Chain Loans
On-chain loans offer flexibility with no fixed repayment schedule, but users must monitor their loan-to-value ratio to avoid liquidation if the collateral’s value drops.
Morpho’s Growth
Morpho is now the 12th-largest decentralized application by total value locked, reaching over $3.2 billion in 2024 with a 444% growth, according to DefiLlama data.
DeFi Expansion
Coinbase’s initiative reflects the importance of decentralized finance (DeFi) tools to the firm’s expansion plans. In the announcement, the exchange framed the new service as a step toward bringing traditional financial tools into the crypto market.
Users can convert borrowed USDC to US dollars for free, making it a tax-efficient alternative to selling Bitcoin. This aspect may appeal to investors seeking to unlock liquidity without triggering taxable events.
cbBTC and WBTC
This move follows Coinbase’s September launch of cbBTC, which allowed customers to move Bitcoin into on-chain environments. According to a Dune Analytics dashboard created by user eekeyguy, cbBTC has surpassed $2.1 billion in supply since its launch, equivalent to 21,495.46 BTC. Meanwhile, Wrapped Bitcoin (WBTC) fell 13.4% in supply over the same period, although its market size is over 132,000 BTC.
Conclusion
Coinbase’s partnership with Morpho marks a significant step in the company’s DeFi expansion plans. The on-chain USDC loan service offers a flexible and tax-efficient way for investors to access liquidity without selling their Bitcoin. As the DeFi market continues to grow, it will be interesting to see how Coinbase and other exchanges evolve their offerings to meet the needs of their users.
FAQs
Q: What is the partnership between Coinbase and Morpho?
A: Coinbase and Morpho have partnered to offer on-chain USD Coin (USDC) loans backed by Bitcoin (BTC). The service allows Coinbase users to borrow USDC by pledging Bitcoin as collateral.
Q: How much USDC can I borrow?
A: Borrowers can access up to $100,000 in USDC, with interest rates determined dynamically by Morpho’s market-driven mechanism.
Q: What is the collateral-to-value ratio?
A: The collateral-to-value ratio is the ratio of the value of the collateral to the value of the loan. Users must monitor this ratio to avoid liquidation if the collateral’s value drops.
Q: Is the loan service tax-efficient?
A: Yes, the loan service is tax-efficient because users can convert borrowed USDC to US dollars for free, making it a tax-efficient alternative to selling Bitcoin.
Q: What is cbBTC?
A: cbBTC is Coinbase Wrapped Bitcoin, a tokenized version of Bitcoin that allows customers to move Bitcoin into on-chain environments.
Q: How has cbBTC performed since its launch?
A: According to a Dune Analytics dashboard, cbBTC has surpassed $2.1 billion in supply since its launch, equivalent to 21,495.46 BTC.
