Cryptocurrency exchange Coinbase is reintroducing Bitcoin-backed loans in the United States, allowing users to borrow against their digital asset holdings. The new offering enables US account holders (excluding New York residents) to borrow up to $100,000 in USD Coin (USDC) by using their Bitcoin (BTC) holdings as collateral. 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, stated that this new product showcases the exchange’s commitment to economic freedom. He also mentioned that crypto-backed loans enable customers to maximize the potential of their Bitcoin, and Coinbase is making it possible onchain.
A Coinbase communications representative clarified that the exchange simply provides a straightforward way for users to access the loan market and is not directly involved in the loans themselves. The representative added that users can benefit from competitive interest rates, with no Coinbase fees or credit checks. Furthermore, borrowers have the flexibility to repay the loans on their own timeline with customizable repayment terms.
This new product line marks Coinbase’s second entry into the Bitcoin lending market. In May 2023, the exchange announced the termination of its Borrow program, which allowed users to obtain cash loans backed by their BTC holdings. The program officially ended on November 20, 2023.
The demand for Bitcoin-backed loans is increasing as it allows holders to access capital without selling their underlying assets. This feature is particularly valuable for individuals who wish to preserve their wealth and avoid substantial tax liabilities. Borrowing against assets has long been a strategy utilized by wealthy households, known as “borrow, borrow, die,” allowing them to continuously take out asset-leveraged loans.
The surging value of Bitcoin has led many early adopters to accumulate significant wealth. Consequently, the market for Bitcoin-backed loans is expected to experience substantial growth in the coming years. According to HFT Market Intelligence, the market value of Bitcoin-backed loans could rise from $8.5 billion in 2024 to $45 billion by 2030.
The increasing adoption of Bitcoin has also attracted more financial institutions to enter the crypto lending market. Bitcoin-backed lending protocol Ledn informed Cointelegraph that major institutions are expanding beyond exchange-traded funds and venturing into the crypto lending business.