Coinbase Launches Bitcoin-backed Loans Through Morpho

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• Coinbase has reintroduced Bitcoin-backed loans for US customers, partnering with DeFi lender Morpho to facilitate the service
• This initiative marks Coinbase’s second attempt at offering crypto-backed loans, following the discontinuation of a similar program in 2023
• The collaboration aims to provide users with seamless access to decentralized finance (DeFi) services through Coinbase’s platform

Coinbase has announced the relaunch of its Bitcoin-backed loan program for U.S. customers through DeFi protocol Morpho. This renewed offering is distinct from its predecessor, Coinbase Borrow, offering users a more integrated and user-friendly experience when accessing DeFi services through its platform. The company hopes its new program will last longer than the nine months of action Coinbase Borrow saw before Coinbase pulled it following regulatory concerns.

Bitcoins A New Approach to Crypto Lending

In this revamped program, Coinbase acts as an intermediary, connecting users to Morpho, which currently manages approximately $3.7 billion in deposits. Paul Frambot, CEO and co-founder of Morpho, highlighted the advantages of this partnership to DL News:

Morpho empowers companies like Coinbase to maintain full control over the products they build. It also eliminates the need to relinquish control or governance to third parties, such as DAOs.

This approach allows Coinbase to provide loan services without directly facilitating them, thereby reducing potential regulatory risks.

Bitcoins Learning from Past Experiences

Coinbase Borrow, which allowed customers to borrow up to $1 million against 30% of their Bitcoin holdings, was discontinued in July 2023 following a complaint from the Securities and Exchange Commission (SEC) alleging that Coinbase had operated as an unregistered broker, exchange, and clearing agency. At the time, a Coinbase spokesperson attributed the closure to reduced demand. By integrating with Morpho, Coinbase aims to mitigate past challenges and offer a more robust and compliant lending service.

This collaboration represents a significant step in merging traditional financial platforms with the burgeoning DeFi sector. By leveraging Morpho’s infrastructure, Coinbase enables users to access DeFi lending services without the complexities typically associated with decentralized platforms. This model, often referred to as the “DeFi mullet”—a streamlined, user-friendly interface on the front end with complex DeFi operations on the back end—aims to make decentralized financial services more accessible to a broader audience.

As the cryptocurrency landscape continues to evolve, Coinbase’s initiative may set a precedent for how centralized exchanges can integrate with DeFi protocols to enhance service offerings while navigating regulatory considerations.