Coinbase users can quickly secure a loan worth up to $100,000 in USDC, all while keeping their Bitcoin holdings intact, without the need to sell them immediately.
Coinbase now offers a new service that enables users to obtain USD Coins (USDC), a type of digital money tied to the U.S. dollar, by pledging Bitcoin as security. This feature caters to American customers outside of New York and is intended to provide a faster and more convenient method for obtaining funds without having to liquidate Bitcoin.
As per information obtained from crypto.news, here’s how it operates: Clients put up their Bitcoin as security, which is then transformed into cbBTC – a type of Bitcoin developed by Coinbase that serves as a wrapper for the original Bitcoin. This wrapped token enables Bitcoin to be utilized within decentralized financial systems.
As a researcher, I’m involved with the process where cbBTC is forwarded to Morpho, an on-chain lending platform established on Coinbase’s Base blockchain. In return, users receive USDC loans, which can be utilized for various expenses, transferred across borders effortlessly, or exchanged directly into U.S. dollars.
Instead of standard loans with rigid repayment plans, these types of loans allow borrowers to repay at their convenience, as long as the loan amount doesn’t exceed a safe threshold in relation to the collateral. However, if Bitcoin’s value experiences a substantial decrease, liquidations may take place to maintain the loan’s security.
Crypto lending has raised some concerns due to the collapse of companies like Celsius and BlockFi last year, resulting in massive financial losses and a decline in confidence in crypto lending. However, Coinbase is now taking on a broker role for loans facilitated by Morpho, a decentralized finance (DeFi) platform.
Benefits of crypto-backed loans
Lending with cryptocurrencies offers numerous benefits. Rather than having to sell Bitcoin, users can borrow money and thus postpone the payment of capital gains taxes. Moreover, these lending platforms work in a clear and straightforward manner through the use of automated smart contracts, ensuring smooth and efficient management of funds on the blockchain.
This action is a continuation of Coinbase’s step in September, where they introduced cbBTC, allowing customers to engage with DeFi apps. By integrating cbBTC with USDC loans, Coinbase links traditional banking with decentralized solutions, thereby making these services easier for users to utilize.
Kick things off by heading to the Cash section of your Coinbase account, commit some Bitcoins, and you’ll immediately receive USDC. The loan rates will adapt dynamically according to the market action on the Base blockchain. This launch is another stride towards making decentralized finance easier for users to navigate.
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2025-01-16 18:18