Coinbase Lets You Borrow $100,000 With Your Bitcoin!

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As a researcher, I’m excited to share that Coinbase has introduced a unique loan service, backed by Bitcoin (BTC), allowing me and other users to borrow up to $100,000 in USD Coin (USDC) without having to part with our BTC holdings. This innovative service is fueled by the decentralized finance (DeFi) protocol Morpho, functioning on Coinbase’s Ethereum Layer 2 network, Base. At the moment, this service caters to U.S. residents, excluding those residing in New York, with future plans for broader market expansion.

Coinbase Rolls Out Bitcoin-Backed Loans Powered by Morpho Protocol

Recently, Coinbase, a digital currency exchange, introduced a new lending feature enabling users to secure loans worth up to 100,000 USDC by pledging Bitcoin as security. This service operates using Morpho, a decentralized finance (DeFi) platform, to manage these loans on the Ethereum blockchain. This move represents an effort by Coinbase to combine conventional financial services with DeFi.

In a nutshell, when users commit Bitcoin, it gets transformed into cbBTC – a variant of Bitcoin developed by Coinbase. This wrapped token facilitates smooth functioning of Bitcoin in the realm of decentralized finance. By employing cbBTC, Coinbase guarantees that the security deposit remains compatible with Morpho’s lending system. This means users can tap into liquidity without selling their Bitcoin holdings.

In relation to the ongoing legal battle between the SEC and Coinbase, Binance has submitted a joint statement to the court, building on the partial success Coinbase achieved in its rulemaking petition lawsuit. Binance intends to utilize this decision to bolster its own case for dismissing the U.S. SEC’s accusations. The exchange asserts that the SEC’s complaint does not satisfy the conditions of the Howey test.

How the Loan Process Works

Remarkably, users of Coinbase can apply for a loan by using their Bitcoin as security via the Coinbase app. Once the Bitcoin is secured, it gets changed into cbBTC at a 1:1 rate and sent to the Morpho DeFi protocol. In exchange, borrowers receive USDC loans immediately in their Coinbase accounts, providing quick access to funds.

Furthermore, we’ve designed the process to be both swift and hassle-free, prioritizing efficiency and user comfort. There are no charges involved when you switch Bitcoin to cbBTC, and the entire operation takes place on the blockchain itself. Users have the flexibility to use their borrowed USDC for a range of purposes such as daily expenses, international money transfers, or exchanging it into U.S. dollars whenever required.

Flexible Repayment Terms and Risk Management

One notable aspect of Coinbase’s Bitcoin loans is that there isn’t a set repayment plan; instead, borrowers can choose their own repayment timing, as long as they keep the loan-to-value (LTV) ratio at a secure level. This LTV ratio is crucial because it ensures that the loan remains properly secured by sufficient collateral, reducing the likelihood of forced liquidation.

In case Bitcoin’s worth drops, the exchange will sell the collateral to repay the loan. This system helps maintain the safety of the loan and allows the exchange to handle the risk arising from Bitcoin’s volatile nature.

At present, Coinbase’s Bitcoin-secured loan product is accessible to clients across the U.S., with one exception being New York. The firm aims to extend this service to further markets, thereby making it available to a larger number of users. Initially, Bitcoin serves as the collateral, but in future updates, Coinbase intends to accept more cryptocurrencies for its loan service.

Furthermore, it’s worth noting that the cryptocurrency trading platform has broadened its services, introducing Peanut the Squirrel (PNUT) meme token on the Solana blockchain. Starting this January, traders will be able to deal with PNUT, and the PNUT-USD trading pair is set to debut in stages.

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2025-01-16 19:14