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Coinbase expands crypto credit with ETH collateral
Coinbase has introduced Ethereum-backed loans for eligible U.S. customers, enabling ETH holders to borrow up to $1 million in USDC without selling their tokens. The new offering extends Coinbase's push into decentralized finance and crypto-native lending, giving users access to liquidity while they keep exposure to Ethereum.
How the ETH-backed loans work
Borrowers deposit ETH as collateral and receive USDC stablecoin. Loans are facilitated through Morpho, a lending protocol operating on Base, Coinbase's Layer 2 network. Coinbase provides the user-facing interface while Morpho smart contracts execute the lending positions on-chain. This hybrid model connects centralized exchange convenience with decentralized finance liquidity.
Availability, limits, and tax considerations
The service is available in most U.S. states but excludes New York due to local regulatory rules. Eligible customers can borrow up to $1 million in USDC collateralized by ETH. Because users are pledging ETH rather than selling it, receiving USDC typically does not create a taxable disposal event, though borrowers should consult a tax advisor for personalized guidance.
Risk management and Liquidation rules
Coinbase requires borrowers to maintain a loan-to-value ratio below 86 percent. If positions exceed that threshold, automated liquidation can occur to protect lenders from crypto price volatility. The platform also said it plans to add support for additional assets over time, including cbETH, Coinbase's staked-ETH derivative, expanding collateral options for users.
Market context and DeFi integration
This launch follows Coinbase's earlier increase of Bitcoin-backed loan limits to $5 million and represents one of the exchange's largest DeFi-integrated credit products to date. Onchain lending activity across the Base ecosystem recently topped 1.25 billion dollars, driven by both institutional and retail demand. Morpho has seen notable inflows as traders and long-term holders use collateralized borrowing to access liquidity without selling core crypto positions.
What this means for crypto credit
By combining a centralized user experience with DeFi execution, Coinbase is positioning itself deeper into the crypto-native credit market. The ETH-backed loans aim to attract users who want short-term liquidity, leverage, or diversification opportunities while preserving long-term exposure to Ethereum. As DeFi lending protocols evolve and regulatory clarity improves, these hybrid products could become a mainstay for investors seeking flexible, collateralized financing in crypto markets.
Source: crypto
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