ECNETNews reports that Coinbase has launched a groundbreaking service enabling users to borrow up to $100,000 USDC in under a minute, all while retaining ownership of their Bitcoin.
Coinbase’s innovative offering allows U.S. customers (excluding those in New York) to use Bitcoin as collateral for borrowing USD Coin (USDC), a stablecoin pegged to the U.S. dollar. This initiative aims to provide faster and more flexible access to funds without necessitating the sale of Bitcoin (BTC).
The borrowing process is efficient: Customers stake their Bitcoin, which is then transformed into cbBTC, a wrapped version of Bitcoin created by Coinbase. This allows Bitcoin to seamlessly integrate within decentralized finance (DeFi) ecosystems.
The cbBTC is transferred to Morpho, an on-chain lending protocol utilizing Coinbase’s Base blockchain. In exchange, users receive USDC loans, which can be utilized for expenses, sent globally, or converted into U.S. dollars.
Distinct from traditional loan structures, there are no rigid repayment terms. Borrowers maintain the flexibility to repay loans at their convenience, provided the loan remains within a secure value range concerning the collateral. However, significant fluctuations in Bitcoin’s value could lead to liquidations to protect the loan’s coverage.
While the crypto lending sector has faced scrutiny following the bankruptcies of companies like Celsius and BlockFi in 2022, Coinbase aims to restore confidence by acting as an intermediary for loans powered by Morpho, a DeFi protocol.
Advantages of Crypto-Backed Loans
Crypto-backed loans offer numerous benefits. By borrowing against Bitcoin rather than liquidating it, users can defer capital gains taxes. Furthermore, on-chain lending frameworks promote transparency, relying on automated smart contracts for efficient fund management.
This recent development follows Coinbase’s launch of cbBTC in September, which enabled users to engage with various DeFi applications. By integrating cbBTC with USDC loans, Coinbase effectively connects traditional finance with decentralized solutions, enhancing accessibility for users.
To begin the process, customers can visit the Cash tab in their Coinbase accounts, pledge Bitcoin, and receive USDC within moments. The interest rates on loans will automatically adjust based on market conditions within the Base blockchain. This launch marks a significant advancement in making decentralized finance more user-friendly.
