Coinbase has introduced crypto-backed loans in the UK on Monday, April 20, allowing eligible users to borrow USDC against their crypto holdings. The launch extends a product already available in the United States and select global markets for users.
The service allows users to lock assets such as Bitcoin and receive USDC in their Coinbase account. This structure provides fast liquidity while users keep exposure to market price movements of their collateral assets.
According to an official announcement, Coinbase said that the loans operate on Base, its Ethereum layer-2 network. The system uses the Morpho DeFi lending protocol. The Coinbase app offers a simple interface, but the loan execution remains fully on-chain.
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To initiate a loan, a user will choose an eligible asset and determine the amount of borrowing. The user then pledges crypto as collateral. The collateral is transferred to a Morpho smart contract, and USDC is deposited in the account balance.
The loans are over-collateralized to deal with risk. The typical loan-to-value ratio starts at up to 75%. When the loan value and interest are approximately 86% of the collateral value, the system initiates partial liquidation.
This liquidation pays off a portion of the debt and imposes a penalty. The mechanism safeguards the protocol against under-collateralized positions. It also maintains the system in line with typical DeFi risk controls.
There are no fixed repayment deadlines for these loans. The interest accumulated with time depending on the amount borrowed. Borrowers are allowed to repay any time provided the loan is not more than the liquidation threshold.
Coinbase has been building its lending system with USDC, Bitcoin, and Ethereum. It first launched Bitcoin-backed USDC loans. It subsequently lent on-chain USDC and borrowed ETH via Morpho on Base.
The UK launch provides another area for lending services. Coinbase still provides these products on its regulated platform. The company markets the service as a means of getting liquidity without the need to sell assets.
In all products, USDC is still at the center of this model. It is the primary stablecoin in which to borrow and lend. This strategy facilitates dollar-based liquidity in the Base ecosystem.
To the users in the UK, this is an advantage of having access to the USDC without the need to sell their crypto holdings. The money may be exchanged in various exchanges or converted into local currency. The crypto-backed loans maintain long-term positions in place and offer liquidity.
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