Coinbase Launches Bitcoin-Backed Loans for USDC Stablecoin
Coinbase launches Bitcoin-backed loans, allowing users to borrow USDC Stablecoin No need to sell their Bitcoin holdings.
The service is powered by open source lending protocol Morpho and built on the Base blockchain, and is available to customers in the United States except New York State.
Coinbase users borrow USDC with Bitcoin collateral
The US-based cryptocurrency exchange shared the news in a post on X (Twitter). Coinbase said the lending facility may support more collateralized assets in the future.
“Bitcoin-backed lending is here. Borrow USDC against Bitcoin, but without selling. Rolling out to US users (e.g. New York) starting now. More collateralized assets and regions coming soon. Powered by Morpho Labs and based on Base is built. The future of finance is on-chain.” point out.
in the follow-up blogCoinbase highlighted the benefits of its new product. It highlights the ability to defer potential tax implications by allowing users to borrow Bitcoin rather than sell it.
The company also notes that seamless integration On-chain protocols such as Morpho according to. According to the exchange, these integrations will make access to financial services faster and more intuitive.
“This is another important step in giving our customers more control over their financial lives,” reads an excerpt from the blog.
Coinbase’s USDC lending facility enables users to stake Bitcoin (BTC) as collateral. BTC is converted to Coinbase’s Bitcoin wrapper, Bitcointransferred to Morpho at a 1:1 ratio smart contract. In return, users receive USDC, which can be spent in a variety of ways. First, users can receive over 4% bonuses and can ship worldwide for free.
In addition, users can exchange USDC for U.S. dollars to pay for large expenses, including buying a car or a mortgage down payment. Coinbase is also working to simplify the process, allowing users to borrow up to $100,000 in USDC, depending on the value of their Bitcoin collateral.
According to the blog, interest rates are variable and Morpho automatically determines this factor based on market conditions. There is no fixed repayment schedule, so it is flexible. However, failure to maintain the value of the collateral relative to the loan will trigger automatic liquidation. This technicality has elicited mixed reactions from the cryptocurrency community.
“It’s going to be a huge grab. People put their BTC as collateral and then something happens that triggers a price crash that causes automatic liquidation and you no longer own your Bitcoin, Coinbase does,” Popular on X User Kurt Knapp, commented.
Others have expressed concerns about centralization risks and variable interest rates, citing a departure from the ethos of decentralization. Decentralized Finance.
“This sounds convenient to Coinbase users…but for serious DeFi users who value decentralization and cost efficiency, centralization and variable rates don’t hit the mark,” explain Ashley, supporter of decentralization.
Overall, these concerns focus on centralization and marketization volatility. Variable interest rates that recalculate every few seconds can increase unpredictability for borrowers.
“Coinbase says they are relaunching “Bitcoin Lending,” but read the fine print. Coinbase is just the middleman. They wrap Bitcoin into cbBTC and deploy it into Morpho, an Ethereum-based DeFi lending protocol. I wouldn’t use 10 ft. long pole to touch this product,” another user additional.
Additionally, liquidation risk during market downturns is a significant flaw. If the value of Bitcoin plummets, borrowers could lose their collateral, potentially resulting in significant financial losses. Technology innovation researcher Thomas Young also Flag concerns Taxable events related to this product.
As the platform launches the service and explores new markets, its ability to solve these problems may determine the product’s success. Meanwhile, while the service is currently limited to the United States, Coinbase plans to expand globally.
The EU could be the next market due to USDC’s alignment with the EU Mika regulations. Coinbase Recent European regulatory clarity continues to improve The EU is positioned as the exchange’s next potential target market, with plans to expand the offering internationally.
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