Coinbase Lets Users Borrow USDC Against Bitcoin at Fixed Rates

Coinbase is expanding its crypto lending business with fixed-rate loans that allow users to borrow USDC against their Bitcoin without selling it. The new option lets borrowers lock in both their interest rate and repayment date when the loan is created, bringing a more traditional fixed-term credit structure to onchain lending.

Coinbase Adds Fixed-Rate Bitcoin Loans

The new loans are powered by Morpho Midnight, a noncustodial lending protocol designed for fixed-rate and fixed-term borrowing.

Transactions settle on Base, Coinbase’s Ethereum Layer 2 network, while Coinbase provides the customer-facing experience. Morpho described the rollout as the first enterprise-scale integration of Midnight.

Users pledge Bitcoin as collateral and receive USDC while retaining exposure to BTC’s price. Instead of selling Bitcoin to access liquidity, borrowers can use their holdings to secure the loan.

Rates and Repayment Dates Are Locked Upfront

The major difference from Coinbase’s existing lending product is how borrowing costs are determined.

Coinbase’s variable-rate loans can change based on supply and demand within the underlying lending market. With the new fixed-rate option, borrowers know their interest rate and repayment date from the beginning.

That gives Coinbase customers two different onchain borrowing models:

• Variable-rate loans through Morpho Blue
• Fixed-rate, fixed-term loans through Morpho Midnight

Fixed-rate borrowers must repay their loan in full by maturity. Coinbase says a loan that remains unpaid after its maturity date can become eligible for liquidation even when its collateral ratio would otherwise be healthy.

Coinbase Lending Passes $1.4 Billion

The expansion comes after significant growth in Coinbase’s existing crypto-backed lending business.

Its variable-rate loans have surpassed $1.4 billion in active borrowing backed by approximately $3 billion in collateral, according to Coinbase and Morpho.

The service converts collateralized BTC into Coinbase Wrapped BTC (cbBTC) before moving it onchain into Morpho smart contracts. Coinbase acts as the interface, while the underlying loans are sourced and managed through Morpho.

Borrowers Still Face Bitcoin Liquidation Risk

A fixed interest rate doesn’t eliminate the biggest risk associated with crypto-backed borrowing.

Because Bitcoin secures the loan, a sharp decline in BTC’s price can increase the loan-to-value ratio and eventually trigger liquidation. Coinbase says liquidation thresholds depend on the collateral and lending market involved.

Coinbase also charges processing and platform fees. For fixed-rate loans, the platform fee is paid upfront, and borrowers can review the applicable charges before confirming the loan.

Coinbase Pushes DeFi Lending Into Its Main App

The rollout represents another example of decentralized finance infrastructure being placed behind a familiar consumer interface.

Customers don’t need to independently navigate Morpho or manually interact with DeFi smart contracts. Coinbase handles the user experience while Morpho provides the underlying lending infrastructure and Base handles settlement.

It also arrives as Coinbase rapidly expands beyond conventional crypto trading. The company recently opened IPO allocations to eligible U.S. customers, while its lending business is increasingly connecting users with onchain financial markets.

For Bitcoin holders, the new product provides another way to access dollar-denominated liquidity without immediately selling BTC. For Coinbase, it moves the company another step toward combining traditional financial products with DeFi infrastructure directly inside its consumer platform.