TL;DR
- Coinbase launched loans of up to $1M in USDC using Ether (ETH) as collateral, via the Morpho protocol.
- The expansion follows the success of its BTC-backed product, which has already facilitated over $1.25 billion.
- The service aims to offer long-term liquidity to holders without generating taxable events (LTV rates up to 75%).
One of the largest cryptocurrency exchanges, Coinbase, has expanded its lending product to include Ether (ETH) as collateral, a move that signifies a huge step in the on-chain credit market. Eligible customers can now borrow up to $1 million in USDC without the need to liquidate their crypto holdings.
Coinbase’s new on-chain ETH lending service is enabled by the Morpho protocol on the Base network, with the host company providing the intuitive, easy-access interface. The launch aligns with record growth in on-chain credit markets. Galaxy Research, in its latest report, highlights that crypto-collateralized loans reached $73.6 billion in the third quarter, the highest quarter-end figure ever, with DeFi platforms representing more than half.
Coinbase’s foray fits perfectly into this trajectory: its previous BTC-backed product facilitates over $1.25 billion in loans to some 16,000 customers.
The On-Chain Model: Tax-Free Liquidity
The primary objective of Coinbase On-Chain ETH Loans is clear: to allow long-term holders to access liquidity for larger expenses without having to sell their assets, thus avoiding a taxable event.
Ben Shen, Senior Product Director at Coinbase, emphasized that “People should be able to access liquidity without needing to sell the assets they believe in.” Initially, the loans use Wrapped Ether (WETH) as collateral, but the company is already working to soon include staked ETH (converting it to cbETH).
The loans have no fixed repayment schedule, provided borrowers maintain a healthy loan-to-value (LTV) ratio to avoid liquidation. Customers can obtain an LTV of up to 75%, with liquidation set at 86%, the same threshold as the Bitcoin-backed product. Interest rates are variable and determined by supply and demand on Morpho. For now, Coinbase On-Chain ETH Loans are available to verified users in the U.S. (excluding New York), with international expansion plans.
