Cryptocurrency exchange Coinbase has reintroduced its Bitcoin-backed loans service in the United States, allowing users to borrow against their digital assets. The new product line enables US account holders, excluding residents of New York, to borrow up to $100,000 in USD Coin (USDC) using their Bitcoin (BTC) holdings as collateral. It’s important to note that only BTC held on Coinbase qualifies as collateral for the loan.
To facilitate the lending process, Coinbase has partnered with decentralized finance protocol Morpho Labs. The lending will take place entirely on Base, the exchange’s Ethereum layer-2 network. Max Branzburg, a Coinbase executive, emphasized that this new product reflects the exchange’s commitment to economic freedom and enables customers to make more use of their Bitcoin on-chain.
A representative from Coinbase clarified that the exchange provides a simple way for users to access the loan market but is not directly involved in the loans themselves. Users can benefit from competitive interest rates without Coinbase fees or credit checks and have the flexibility to repay the loans on their own timeline with flexible repayment terms.
This marks Coinbase’s second entry into the Bitcoin lending market. In May 2023, the exchange announced the end of its Borrow program, which allowed users to obtain cash loans backed by their BTC holdings. The program was officially shut down on November 20, 2023.
The demand for Bitcoin-backed loans has increased as holders want to access capital without selling their holdings and incurring large tax bills. This feature is particularly attractive to individuals who wish to maintain their wealth. Borrowing against assets is a strategy commonly used by wealthy households to take out asset-leveraged loans over an extended period.
With Bitcoin’s value on the rise, early holders have accumulated significant wealth. As a result, the market for Bitcoin-backed loans is expected to grow in the coming years. HFT Market Intelligence predicts that the market value of Bitcoin-backed loans could increase from $8.5 billion in 2024 to $45 billion by 2030.
The growing adoption of Bitcoin has also encouraged more financial institutions to enter the crypto lending market. Bitcoin-backed lending protocol Ledn stated that major institutions are expanding beyond exchange-traded funds and venturing into the crypto lending business.