Coinbase, one of the world’s leading cryptocurrency exchanges, has reintroduced Bitcoin-backed loans for U.S. customers. This new offering allows users to borrow funds by leveraging their Bitcoin holdings, signaling Coinbase’s renewed focus on expanding financial freedom for crypto investors.
How the New Loan Product Works
Eligible U.S. customers, excluding residents of New York, can now borrow up to $100,000 in USD Coin (USDC) using Bitcoin (BTC) held on Coinbase as collateral. The lending process is facilitated by Morpho Labs, a decentralized finance (DeFi) protocol, and operates entirely on Coinbase’s Ethereum layer-2 network, Base.
Max Branzburg, Coinbase’s vice president, emphasized the company’s commitment to empowering its users, stating, “Crypto-backed loans allow our customers to do more with their Bitcoin, and we’re making it happen onchain.”
A Coinbase representative clarified that the exchange itself does not issue the loans. Instead, it provides users access to the loan market, offering competitive interest rates with no fees or credit checks. Borrowers also enjoy flexible repayment terms, allowing them to repay loans at their convenience.
Coinbase’s Second Attempt at Bitcoin Lending
This is Coinbase’s second venture into Bitcoin-backed loans. Previously, the company introduced the Borrow program, which allowed customers to take cash loans against their Bitcoin holdings. However, the program was discontinued on November 20, 2023.
By partnering with DeFi protocols like Morpho Labs, Coinbase appears to be refining its approach to crypto lending, making the process more decentralized and accessible.
The Growing Demand for Bitcoin-Backed Loans
Bitcoin-backed loans are becoming increasingly popular among crypto holders who want to access liquidity without selling their assets. This strategy allows borrowers to retain their Bitcoin, avoiding potential capital gains taxes and benefiting from the long-term growth of their holdings.
Borrowing against assets is a tried-and-true method historically used by wealthy individuals. This approach, often referred to as “borrow, borrow, die,” enables people to leverage their assets without relinquishing ownership.
As Bitcoin adoption continues to grow, so does the demand for crypto-backed lending. According to HFT Market Intelligence, the market for Bitcoin-backed loans is projected to soar from $8.5 billion in 2024 to $45 billion by 2030.
Financial Institutions Enter the Bitcoin Lending Market
The increasing popularity of Bitcoin-backed loans has encouraged more financial institutions to enter the crypto lending space. Protocols like Ledn are working to streamline the borrowing process, while major institutions are moving beyond exchange-traded funds (ETFs) to explore opportunities in crypto-backed lending.
This broader adoption underscores the growing role of Bitcoin as a valuable financial asset, not just for trading but also for unlocking liquidity.
