Cryptocurrency platform Coinbase formally launched a lending product enabling users to obtain up to $100,000 in USD Coin, a stablecoin anchored at $1 against Bitcoin. The firm stated that the feature is available to U.S. clients except New York and provides fast and convenient access to cash without selling BTC.
Customers’ funds are Bitcoin, on the basis of which the firm generates cbBTC, an application of Bitcoin developed by Coinbase. This wrapped token effectively integrates Bitcoin into decentralized financial systems.
The cbBTC is then transferred to Morpho, an on-chain lending platform constructed on Coinbase’s Base platform. In exchange, users get loans in USDC that can be used to pay bills, transfer cash internationally, or just swap for USD.
It stands out from other fiscal services, such as loans, since the new service has no set times when particular payments are due. Borrowers can repay at their convenience as long as the value of the loans falls within the prudent range of the collateral. However, if the value of Bitcoin falls sharply, automatic liquidations start to occur to keep the loan adequately covered.
Overcoming Crypto Lending Challenges with Coinbase and Morpho
Cryptocurrency lending itself has its drawbacks, specifically the current year situation with the main representatives of this industry, such as Celsius and BlockFi, which has led to losses of billions of dollars and the loss of investors’ confidence. This strategy makes it easier for Coinbase to act as a middleman for Morpho, where loans can be processed through the DeFi protocol.
This is complemented by the deployment of Smart Contracts for fund management automation and decentralization, eliminating centralities’ pitfalls. As for now, Coinbase officially wants to return faith in crypto lending and has bold offerings and solutions for civilian customers.
Among the uses of crypto-backed loans is that such a financial solution allows getting a loan without selling Bitcoin, thus helping avoid paying capital gain taxes. Further, because these loans are recorded on the blockchain, they afford transparency and expedience wholly unmatched in the conventional financial market.
The service extends the firm’s previous release of cbBTC in September, where users can interact with decentralized finance applications. This bridge essentially allows Coinbase to connect centralized finance and decentralized systems, in which USDC lending and cbBTC use are more accessible.
Customers can click on the new service in their Coinbase accounts under the Cash tab to stake Bitcoin and receive USDC within a few seconds. The Base blockchain provides that loan interest rates change with market activity, which makes borrowing favorable for borrowers.
Coinbase launched Bitcoin-backed loans, putting into realization the idea of decentralized finance as part of the global financial services package. Through Morpho and its Base blockchain, Coinbase keeps enriching its offerings and addresses most segments of the cryptocurrency community with fresh approaches.
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