Coinbase has announced a partnership with decentralized money market Morpho to provide on-chain USD Coin (USDC) loans collateralized by Bitcoin (BTC). This service, facilitated on the Base layer-2 blockchain, allows users to borrow USDC by pledging their Bitcoin, which is automatically converted to Coinbase Wrapped Bitcoin (cbBTC) and transferred to Morpho.
Loans are subject to dynamic interest rates determined by Morpho's market mechanism, with a borrowing limit of $100,000. While offering flexibility with no fixed repayment schedule, users must closely monitor their loan-to-value ratio to prevent liquidation in case of significant price drops in their collateral.
Expanding DeFi Offerings
This partnership aligns with Coinbase's strategy to integrate DeFi tools into its ecosystem. By offering on-chain loans, Coinbase aims to bring traditional financial services into the cryptocurrency market. Borrowed USDC can be seamlessly converted to US dollars free of charge, and the service is positioned as a tax-efficient alternative to selling Bitcoin, allowing users to access liquidity without triggering immediate tax liabilities.
This initiative follows the successful launch of cbBTC in September 2024, which has seen a rapid adoption, surpassing $2.1 billion in supply. In contrast, Wrapped Bitcoin (WBTC) has experienced a 13.4% decline in supply during the same period, despite its significantly larger market size.
Morpho's Growth and Market Position
Morpho, currently the 12th-largest decentralized application by total value locked, has experienced substantial growth, reaching over $3.2 billion in 2024, a 444% increase year-over-year. This collaboration with Coinbase further solidifies Morpho's position within the DeFi landscape.
January 2025, Cryptoniteuae