Coinbase Lending Product Gets Boost from DeFi Lender Morpho, But for How Long?

Coinbase's new lending product offers up to 10.8% returns on USDC deposits, partly due to a temporary boost from DeFi lender Morpho. Morpho is augmenting the returns, but Coinbase declined to disclose whether it was a deal or when the subsidy might end. The arrangement is part of Morpho's broader incentives to drive activity in its ecosystem.

Coinbase (COIN) has introduced a new USDC lending product that offers users the opportunity to earn up to 10.8% returns on their USDC deposits. The feature, powered by the decentralized finance (DeFi) protocol Morpho, allows Coinbase users to participate in DeFi lending markets directly from the Coinbase app.

The new product leverages Morpho's infrastructure to route USDC deposits through curated vaults managed by Steakhouse Financial. These vaults allocate capital across optimized lending markets to balance risk and return, generating yields for depositors. The interest paid by borrowers, including those using Coinbase's crypto-backed loans secured by Bitcoin, generates returns for depositors, who can withdraw their funds anytime without lockups.

Coinbase's new USDC lending product builds on its existing crypto-backed loan service, which has already originated over $900 million in loans. The integration of DeFi lending creates a closed-loop system that improves the overall scalability of both products and enhances internal liquidity. This move further solidifies Coinbase's position as a leader in onchain financial services.

The temporary boost in returns, currently up to 10.8%, is attributed to Morpho's incentives to drive activity within its ecosystem. However, Coinbase has declined to disclose whether the subsidy is part of a deal or when it might end. The "DeFi mullet" approach, which combines a familiar fintech user experience with decentralized infrastructure, is a key component of Coinbase's strategy to bridge traditional finance and DeFi.

Coinbase's new USDC lending product provides users with an easier entry into decentralized lending markets without leaving the Coinbase platform. This seamless integration of DeFi infrastructure with a user-friendly interface is likely to increase product stickiness and drive platform-wide engagement.