Source: finance magnates, 20/1/2024
Coinbase announced on Thursday that it now allows customers in the United States to borrow up to $100K in USDC using Bitcoin as collateral. This offer is in collaboration with Morpho, a lending protocol on the Base network of Coinbase.
This service offers an alternative to traditional credit-based loans by enabling cryptocurrency holders to benefit from liquidity without giving up their assets.
“Customers can borrow USDC instantly at competitive interest rates with flexible and open repayment terms,” the exchange explained. Morpho, an open-source lending protocol on Base, backs the loans. The platform will launch cryptocurrency-backed loans using Bitcoin as collateral and plans to add more assets in the future.
On-chain cryptocurrency loans
By integrating Morpho’s lending capabilities into its intuitive interface, Coinbase aims to remove technical hurdles that have historically deterred users. Unlike traditional credit-grade loans, cryptocurrency-backed loans require borrowers to provide collateral greater than the amount they intend to borrow. For example, borrowing $100,000 in USDC Mortgage an equivalent or greater amount of Bitcoin.
If the value of collateral decreases due to market volatility, the Morpho protocol automatically liquidates the assets to cover the loan. Coinbase stated that the new service will be available in the United States, except for New York State.
The new loan service from Coin base includes several interconnected steps: Users pledge Bitcoin, which is converted into Coin base coated Bitcoin (cbBTC). cbBTC is sent to Morpho, where the USDC loan is cashed out.
Loans come with flexible repayment terms and competitive interest rates. Borrowers can manage their loans directly through the Coinbase app. Real-time updates and filtering warnings ensure users stay informed. Borrowed funds can be used for various purposes, from financing large purchases to supporting businesses.
Access to Bitcoin-backed loans
“The launch of Coin base Wrapped Bitcoin (cbBTC) in September gave our customers the ability to transfer and use Bitcoin on chain,” the exchange added. “Now, customers can take advantage of the benefits of cbBTC without having to leave Coin base.”
Coin base sees cryptocurrency-backed loans as a step towards reshaping personal finance. Leveraging Decentralized Finance (DeFi), the platform offers a transparent and easy-to-use alternative to traditional banking. Meanwhile, a judge recently ruled in favor of Coin base, dealing a blow to the SEC
The committee on its refusal to establish clear regulations for cryptocurrencies. The court criticized the SEC’s handling of the matter, calling its rejection of the 2022 Coin base petition “arbitrary and capricious.”
