Coinbase has recorded on-chain loans of more than $1 billion secured with Bitcoin, with Morpho being the DeFi protocol that enables this. The service was set up in January 2025 and allows users to borrow USDC against Bitcoin without having to sell their holdings or create taxable events. On X, Coinbase CEO Brian Armstrong mentioned that the next goal is $100 billion for on-chain borrow originations. In his words, this “hockey stick” effect in the on-chain economy is witnessing a very fast adoption. This landmark will definitely go a long way in leveraging the traditional finance system with the DeFi infrastructure.
Source: The Block
The process of on-chain loan starts with the users’ Bitcoin getting wrapped in Coinbase-wrapped Bitcoin (cbBTC). Morpho receives the Bitcoin that has just been wrapped and issues USDC loans to the borrowers directly in their Coinbase account. Even though an initial security ratio of 133% is set for the loans, users may decide to opt for higher loan-to-value levels.
When it reaches 86% of the market value of the collateral, the liquidation of the positions will happen automatically, and thus the debt plus the penalty fees will be paid off. Interest rates are recalculated with every new block on the Base blockchain, while payments are made at the borrower’s convenience without any restrictions on the amount and no specified deadlines.
At the beginning, the maximum amount that Coinbase was willing to lend in USDC was $100,000. Due to demand that was beyond expectations, the limit was raised to $1 million after early originations had already totaled $130 million within the first few months. Currently, Coinbase aims to increase the limit to $5 million for Bitcoin-backed loans, which is a clear indication of a positive trend in the market. Although Bitcoin remains the only cryptocurrency that can be used as collateral, Coinbase is working on further plans to have more supported cryptos and thus have more users for its on-chain lending services.a
The onchain loan service is currently available to U.S. users, excluding New York residents, providing a seamless interface that blends traditional finance with DeFi capabilities. By allowing borrowers to maintain exposure to Bitcoin while accessing liquidity efficiently, Coinbase strengthens its position in the onchain borrowing market. The platform’s success demonstrates growing confidence in decentralized finance solutions integrated into regulated exchange platforms.
