Coinbase has launched a new lending product that allows eligible customers to borrow up to $1 million in USDC, using Ether (ETH) as collateral. This expansion of its lending service, which previously focused on Bitcoin, signifies a significant development in the on-chain credit market.
The new Ether-backed lending service operates through the Morpho protocol on the Base network, with Coinbase providing a user-friendly interface. This launch coincides with a period of substantial growth in the crypto-collateralized loan market, which reached a record $73.6 billion in the third quarter, with decentralized finance (DeFi) platforms accounting for over half of this figure, according to Galaxy Research.
Coinbase's existing Bitcoin-backed lending product has already facilitated over $1.25 billion in loans for approximately 16,000 customers, demonstrating a strong demand for such services.
The On-Chain Model: Tax-Free Liquidity
The core purpose of Coinbase On-Chain ETH Loans is to enable long-term holders to access liquidity for significant expenses without needing to sell their digital assets, thereby avoiding taxable events.
Ben Shen, Senior Product Director at Coinbase, stated, "People should be able to access liquidity without needing to sell the assets they believe in." Initially, the loans will accept Wrapped Ether (WETH) as collateral. Coinbase is also actively working to integrate staked ETH, which will be converted to cbETH, into the collateral options in the near future.
Borrowers are not subject to a fixed repayment schedule, as long as they maintain a sufficient loan-to-value (LTV) ratio to prevent liquidation. The service offers an LTV of up to 75%, with liquidations occurring at 86%, mirroring the threshold of the Bitcoin-backed product. Interest rates are variable and are determined by the supply and demand dynamics on the Morpho protocol.
Currently, Coinbase On-Chain ETH Loans are available to verified users in the United States, with the exception of New York residents. The company has plans for international expansion of this service.