Captain’s note
- Coinbase says the bitcoin you pledge is converted 1:1 to Coinbase Wrapped BTC (cbBTC) and transferred to a Morpho smart contract on Base, where it is held as collateral.
- Crypto-backed loans are available to verified customers in the U.S. excluding New York, with limited access in the UK and Canada, according to Coinbase.
- Coinbase describes itself as the interface to the Morpho protocol and says it cannot prevent your collateral from being liquidated on Morpho.
Coinbase is the most widely known U.S. exchange offering loans against bitcoin, and it publishes the mechanics in detail. This page summarizes those published terms as of October 2026, so you can read them in one place before opening the app. It is not a recommendation to borrow from Coinbase or anyone else, and Coinbase can change any of these terms; the app and the help center are the authority.
What the product is
Coinbase calls the product DeFi Borrow, and its marketing pages call it crypto-backed loans. You borrow USD Coin (USDC), a stablecoin that Coinbase says is redeemable 1:1 for the U.S. dollar, using crypto in your Coinbase account as collateral. Coinbase describes itself as the interface: the loan is made through Morpho, an onchain lending protocol on Base. Loans are funded by lenders who supply USDC to Morpho’s lending markets, some of them Coinbase customers using its separate lending feature.
Who can use it
- Verified Coinbase customers residing in the United States, excluding New York, with limited access in the UK and Canada.
- Moving to an ineligible location may affect access to existing loans, Coinbase notes.
- Collateral began with bitcoin; the help center now also lists Ethereum, Solana, XRP, Dogecoin, Cardano, Litecoin and several other assets, with options that can differ between variable and fixed rates.
- Borrowing limits vary by asset and are shown in the product. Coinbase’s borrow page lists up to $5 million in USDC against bitcoin.
Setting up a loan
In the app you choose Borrow, pick a variable or a fixed rate, enter an amount and review a loan preview that shows the processing fee, a risk disclosure and the loan total. The setup needs a smart wallet to transact onchain. When you confirm, the bitcoin you pledge is withdrawn from your Coinbase account, converted 1:1 to Coinbase Wrapped BTC (cbBTC) at no charge, and moved into a Morpho smart contract. The USDC lands in your Coinbase balance once the transaction is processed. Coinbase says it sponsors the network gas fees.
Rates and fees
| Item | Coinbase’s terms |
|---|---|
| Variable rate | Set by Morpho from supply and demand in the lending market; changes continuously |
| Fixed rate | Locked at confirmation for a set term; must be repaid in full by maturity; early repayment does not reduce interest |
| Platform fee | The rate may include a platform fee from Coinbase on top of the market rate |
| Processing fee | One-time, charged each time you borrow, added to the principal |
| Credit check | None |
Coinbase advertises a starting rate on its borrow page, but rates move; check the rate in the app on the day you borrow, and read Interest Rates on Crypto Loans: Variable, Fixed and the Fees on Top for how variable and fixed loans compare.
Liquidation
Your loan is liquidated automatically if its loan-to-value reaches the market’s liquidation threshold. For bitcoin Coinbase gives that line as 86%: if accrued interest or a falling price brings your balance to 86% of the collateral’s market value, collateral is sold to repay the loan, and an additional penalty of 4.38% is included. The remaining collateral is then returned to your Coinbase account. Coinbase sends an email when the loan enters its Danger band, which for an 86% threshold starts at 77.4% LTV.
You can add collateral in the mobile app, up to a daily limit of $2.4 million in collateral value, and Coinbase offers a backup site for adding collateral if its main site is unavailable, with a link to save in advance. Fixed-rate loans can also be liquidated simply for not being repaid by maturity.
Loan protection
An optional setting adds a chosen amount of the collateral asset automatically when the loan reaches a trigger LTV. It must be enabled per loan, is applied once, expires after one year, and works only if the asset is in your balance. During market-wide drops, Coinbase says it prioritizes the loans closest to liquidation. Its own wording is the important part: protection helps lower liquidation risk but is not a guarantee.
The risks Coinbase lists
- Crypto and collateral price volatility.
- Protocol-level security vulnerabilities.
- Protocol-level liquidity issues.
- Coinbase Smart Wallet issues.
Its help center adds a structural point, written for its related lending feature: when you use the app to access Morpho, you are making onchain transactions on a decentralized, third-party network, and Coinbase does not control the smart contracts or the terms of the lending protocol. On the borrow page Coinbase also says it cannot prevent collateral from being liquidated on Morpho. The trade-offs of this onchain model against a company holding your coins are covered in Centralized vs DeFi Crypto Lending: Who Holds the Collateral.
Taxes
Coinbase says it will not treat the borrow transaction as a taxable event, and its help center tells borrowers to keep detailed records and consult a tax professional. That is Coinbase’s reporting choice, not an IRS ruling. A liquidation sells collateral, and the conversion to cbBTC is a step worth asking a tax professional about; see Taxes on Crypto-Backed Loans: What the IRS Rules Say and Don’t Say.
Tip: Before borrowing, open the loan health page in the app, note the liquidation price shown for your loan, and save the backup collateral link somewhere you can reach from your phone.