Users can now secure USDC loans against their bitcoin holdings at fixed interest rates and repayment dates.
By Omkar Godbole|Edited by Jamie Crawley10 minutes ago2 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on (appshunter.io/Unsplash)SummaryShow- Coinbase has launched fixed-rate loans allowing users to borrow USDC against their bitcoin, with predetermined interest rates and repayment timelines.
- The loans utilize Morpho Midnight, a decentralized lending protocol, and are processed on Coinbase's Base, an Ethereum layer 2 network.
- This new offering complements Coinbase's existing variable-rate lending services, which currently manages over $1.4 billion in loans backed by nearly $3 billion collateral.
Coinbase, which is publicly traded on Nasdaq under the ticker COIN$200.40·Market Closed, has introduced the ability for its users to borrow USDC, a stablecoin pegged to the dollar, using their bitcoin
BTC$86,037.36 holdings as collateral, ensuring transparency in interest payments.The platform has rolled out these fixed-rate USDC loans backed by bitcoin, where both the interest rate and repayment dates are established at the initial borrowing stage, providing an alternative to its existing variable-rate loans.
“This initiative moves on-chain borrowing beyond the typical variable-rate framework, offering users more predictability regarding their borrowing costs and timelines,” the company stated in a recent announcement.
These fixed-rate loans operate on the Morpho Midnight protocol, which is a decentralized and non-custodial system for fixed-term crypto loans that was launched in July. Transactions are executed on Coinbase's Ethereum layer 2 platform, Base.
This represents a significant change from the previous lending practices at Coinbase, where loans were facilitated through the Morpho Blue protocol, which adjusts rates based on supply and demand and can increase during periods of high borrowing demand. The new fixed-rate option is available alongside the existing floating-rate option, which currently has more than $1.4 billion in active loans supported by almost $3 billion in collateral.
While fixed-rate bitcoin-backed loans are not a novel concept, with companies like Ledn and SATL Lending providing them for some time, Coinbase's approach is notable due to its integration with a decentralized finance application within a widely used consumer platform.
Paul Frambot, co-founder and CEO of Morpho, commented that the collaboration between Morpho and Coinbase has been highly successful, and they are now focusing on expanding their offerings.
“We are building on that success and beginning to scale: introducing new loan types and applications, bringing on-chain credit closer to the scale and diversity of global credit markets,” he expressed on X.
The market for bitcoin-backed credit is estimated to be around $16 billion, as indicated by the Bitcoin Digital Credit Report by Apyx and BitcoinTreasuries.net. Projections suggest this market could expand to $130 billion by 2030 as preferred equity structures gain traction.
There is a notable interest from bitcoin holders to leverage their assets. A survey conducted earlier this year by Protocol Theory among 1,244 cryptocurrency investors in the U.S. and Australia revealed that 88% of respondents expressed a willingness to consider a crypto-backed loan or credit product.