Cryptocurrency exchange Coinbase has reintroduced Bitcoin-backed loans in the United States, allowing users to borrow against their digital assets. The new product line enables US account holders, excluding New York residents, to borrow up to $100,000 in USD Coin (USDC) using their Bitcoin (BTC) holdings as collateral. Only BTC held on Coinbase is eligible as collateral for the loan.
Coinbase has partnered with decentralized finance protocol Morpho Labs to facilitate the lending process, which will take place entirely on Base, the exchange’s Ethereum layer-2 network. Max Branzburg, a Coinbase executive, stated that this new product demonstrates the exchange’s commitment to economic freedom, as it allows customers to maximize the potential of their Bitcoin.
A Coinbase spokesperson clarified that the exchange is not directly involved with the loans and simply provides a simple way for users to access the loan market. Users will have access to competitive interest rates with no Coinbase fees or credit checks and can repay their loans on their own timeline with flexible repayment terms.
This marks Coinbase’s second venture into the Bitcoin lending market, following the closure of its Borrow program in November 2023, which allowed users to obtain cash loans backed by their BTC holdings.
The demand for Bitcoin-backed loans is increasing as it allows holders to access capital without selling their underlying assets, providing a means to maintain wealth and avoid substantial tax bills. Borrowing against assets is a strategy utilized by wealthy households for generations. The surging value of Bitcoin has resulted in newfound wealth for early holders, potentially driving the market for Bitcoin-backed loans in the coming years. According to HFT Market Intelligence, the market value of Bitcoin-backed loans could rise from $8.5 billion in 2024 to $45 billion by 2030.
The growing adoption of Bitcoin has also encouraged more financial institutions to enter the crypto lending market, with major institutions venturing beyond exchange-traded funds and entering the crypto lending business, according to Bitcoin-backed lending protocol Ledn.