Nikolas Sargeant
Coinbase has officially relaunched its Bitcoin-backed loan service in the United States, introducing a revamped platform that enables users to leverage their Bitcoin holdings for borrowing. This strategic move reflects the exchange's commitment to expanding its services while navigating the evolving regulatory landscape.
How Coinbase's New Bitcoin Lending Works
Eligible U.S. customers, except those in New York, can now access loans of up to $100,000 in USD Coin (USDC) using their Coinbase-held Bitcoin as collateral. The lending process involves converting Bitcoin into cbBTC, Coinbase's proprietary wrapped Bitcoin token, which enables integration with DeFi platforms. This token is then deposited into Morpho, a lending protocol operating on Coinbase's Base network, Ethereum's layer-2 solution.
The platform offers flexible repayment options, allowing borrowers to manage their loans without fixed schedules. However, users must maintain adequate collateral levels to prevent liquidation. While Coinbase provides the interface, the actual lending occurs through Morpho's protocol, requiring users to actively monitor their positions.
The Evolution of Coinbase's Lending Strategy
The relaunch follows Coinbase's strategic withdrawal from crypto lending in 2023, when regulatory pressures intensified. Previously, users could borrow up to $1 million against 30% of their Bitcoin holdings. The suspension came after receiving a Wells notice from the SEC, highlighting potential securities law violations.
During this period, Coinbase actively advocated for clearer regulatory frameworks, challenging the SEC's approach to crypto lending services. This regulatory tension contributed to ongoing discussions about the classification and oversight of crypto lending products.
The Future of Bitcoin-Backed Lending
The 2025 relaunch of Bitcoin-backed loans represents Coinbase's adaptation to an improved regulatory environment. With the market for Bitcoin-backed loans expected to grow from $8.5 billion in 2024 to $45 billion by 2030, Coinbase's timing aligns with increasing demand for crypto-backed lending services.
This service provides Bitcoin holders with liquidity options while potentially offering tax advantages compared to direct asset sales. The integration with DeFi protocols also signals a shift toward more decentralized financial services within traditional crypto platforms.
