Coinbase Exchange has rolled out a suite of Ethereum-backed loans, enabling eligible U.S. users to borrow up to $1 million in USD Coin by using their ETH holdings as collateral.
This service, powered by the Morpho protocol and operating on Coinbase’s Base Layer-2 blockchain, sets a new standard for on-chain lending, offering flexible access to liquidity while maintaining crypto exposure.
How Coinbase Ethereum-Backed Loans Work
Users can now lock their Ethereum within their Coinbase accounts and instantly receive USDC loans, all without selling the underlying asset. This not only preserves the potential gains from ETH’s price appreciation but also avoids triggering a taxable event, a commonly raised concern in crypto circles.
The borrowing process is fully integrated; once users deposit ETH, the platform guides them through the Morpho protocol interface, automating collateralization, loan origination, and the disbursement of stablecoins. Limits are at $1 million for ETH-backed loans, while recently raised caps for Bitcoin-backed loans reach $5 million in USDC.
Repayment terms are highly flexible. Borrowers can repay at any time, and interest rates adjust dynamically based on pool liquidity and prevailing supply-and-demand conditions within the Morpho protocol ecosystem.
However, maintaining a robust collateral ratio is essential. Should the ETH price decline sharply, users risk liquidation if their loan-to-value (LTV) ratio exceeds limits.
Expanding Crypto Collateral Lending
This launch reflects Coinbase’s broader strategy of integrating decentralized finance (DeFi) protocols into its regulated, consumer-facing platform. The partnership with Morpho, coupled with Base’s speed and low fees, gives users direct access to on-chain liquidity without needing to navigate complex smart contract interfaces or DeFi dashboards. This service is available to U.S. clients, excluding New York, with plans to expand borrowing options both geographically and across more collateral types.
The new solution is aimed at institutions and businesses, as well as individual cryptocurrency owners. ETH-backed loans suitable for capital raising, company investments, or portfolio diversification are now available to large borrowers previously neglected by centralised exchanges.
Coinbase hopes to promote long-term asset holders and encourage greater use of Ethereum in conventional financial processes by providing customers with access to value without selling.
Access to non-liquidating crypto-backed loans may become a defining feature for exchanges, helping users hedge risks, unlock value, and reduce barriers to adoption.
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