Coinbase, the cryptocurrency exchange in the United States, relaunched Bitcoin backed loans on Thursday. Users can now borrow using their Bitcoin holdings.
Coinbase is expanding its services to keep up with the changing crypto regulatory environment.
Coinbase launches bitcoin-backed loans: What you need to know
According the announcement eligible U.S. residents, except for New Yorkers, can borrow up to $100,000 USD Coin (USDC), using Bitcoin (BTC), as collateral. This service is only available to Coinbase BTC holders.
Users convert their Bitcoins into cbBTC – a wrapped Bitcoin token developed by Coinbase. This token allows Bitcoins to be used in Decentralized Finance (DeFi).
Once converted, cbBTC will be deposited in Morpho, a lending protocol on the chain built on Coinbase’s Ethereum layer-2, Base.
The USDC loan can then be used to pay expenses, conduct global transfers or convert into U.S. Dollars.
Bitcoin-backed loans are not subject to fixed repayment schedules, unlike traditional loans. Borrowers are free to repay their loans at their own pace as long as the Bitcoin collateral is sufficient to cover the loan amount.
If the price of Bitcoin drops significantly, it may be necessary to liquidate some Bitcoins in order to maintain security. After liquidation, any remaining Bitcoin is returned to borrower’s Coinbase accounts.
Coinbase is a platform that allows users to access Morpho’s lending protocol. However, it does NOT manage the loans.
Coinbase is unable to intervene in the collateral liquidation process, so customers must monitor their loans regularly.
Why Coinbase has stopped offering crypto loans in 2023
Coinbase’s decision to stop offering crypto loans in 2023 was a significant change in company strategy.
Users could have borrowed up to $1,000,000 using their Bitcoins as collateral before the shutdown. This service enabled crypto holders to gain liquidity without having to sell their assets.
The U.S. Securities and Exchange Commission’s (SEC) increased its scrutiny of the program as it closed in November 2023.
In March 2023 Coinbase received from the SEC a Wells notice, which indicated that possible enforcement actions could be taken in relation to its lending and borrower services.
The notice raised concerns about possible violations of securities laws, and urged Coinbase to review its offerings.
Coinbase responded by publicly criticizing the SEC over its lack of clarity in regulatory guidelines pertaining to crypto lending. The company demanded more transparency in order to give legal certainty to crypto firms.
The SEC was not Coinbase’s first encounter. The SEC had been closely watching the exchange’s operation, which led to an ongoing suit claiming securities law violations.
Why Bitcoin-backed loans are gaining traction in 2025
Coinbase has adapted to a crypto-friendly regulatory climate by reintroducing Bitcoin-backed loans in 2025.
The loans allow holders to obtain liquidity without having to sell their assets and can offer tax benefits.
According to HFT Market Intelligence , the market for Bitcoin-backed loan is expected to reach $45 billion in 2030.
Coinbase has refocused its efforts on this product to meet the growing demand in this sector.
