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BTC Pulse 2025-01-17 16:47:00

Coinbase Launches Bitcoin-Backed Loan Services for U.S. Users

Coinbase Launches Bitcoin-Backed Loans for U.S. Users Coinbase has announced the return of Bitcoin-backed loans in the United States, offering eligible users an innovative way to leverage their Bitcoin holdings for financial flexibility. This revamped service allows users to borrow up to $100,000 in USD Coin (USDC) by using their Bitcoin as collateral. With its seamless integration into decentralized finance (DeFi) systems, Coinbase’s latest offering represents a step forward in crypto-based lending. How It Works Eligible U.S. customers, except those in New York, can use their Bitcoin held on Coinbase as collateral. The process involves converting Bitcoin into cbBTC, Coinbase’s wrapped Bitcoin token. This token is essential for integrating Bitcoin into the DeFi ecosystem. Once converted, cbBTC is deposited into Morpho, a decentralized lending protocol running on Coinbase’s Ethereum layer-2 network, Base. Through this system, borrowers can receive loans in USDC. These funds can be used for various purposes, such as paying bills, making transfers, or even converting to U.S. dollars. Unlike traditional loans, Bitcoin-backed loans do not have fixed repayment schedules. Borrowers can repay at their own pace, as long as the collateral value adequately supports the loan. However, if Bitcoin’s price drops significantly, Coinbase may liquidate collateral to secure the loan balance, returning any remaining Bitcoin to the borrower’s account. Why Now? The relaunch comes after Coinbase discontinued its crypto lending services in 2023, citing regulatory challenges. The company faced scrutiny from the U.S. Securities and Exchange Commission (SEC), including a Wells notice highlighting potential securities violations. In response, Coinbase paused its lending products to reassess its offerings and called for clearer regulatory guidance. Fast-forward to 2025, and the regulatory environment has become more accommodating, prompting Coinbase to reintroduce the service. The move aligns with the growing demand for crypto-backed financial products as digital assets gain wider acceptance. The Growing Market for Bitcoin-Backed Loans Bitcoin-backed loans have seen increasing adoption due to their ability to provide liquidity without requiring holders to sell their assets. This feature can also offer tax advantages for borrowers. The global market for Bitcoin-backed loans, valued at $8.5 billion in 2024, is projected to expand to $45 billion by 2030. Coinbase’s return to the sector positions it to capitalize on this significant growth while meeting the needs of its users. By integrating Bitcoin with DeFi protocols like Morpho, Coinbase is redefining how users interact with their crypto assets, offering greater financial empowerment.

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