Coinbase Unveils Hybrid DeFi Model to Compete with Traditional Finance

Coinbase has launched a USDC onchain lending product that offers yields as high as 10.8%, marking a significant expansion of its onchain financial offerings. The feature is powered by Morpho, a decentralized finance (DeFi) infrastructure provider, and allows users to earn competitive annual percentage yields (APYs) by depositing USDC. This product complements Coinbase’s existing offering of crypto-backed loans and is designed to provide a seamless, institutional-grade experience for retail users. The new product is part of Coinbase’s broader strategy to position itself as a comprehensive “everything exchange” by integrating DeFi infrastructure with traditional fintech services.

The integration works by routing user-deposited USDC through Morpho Vaults, which are managed by Steakhouse Financial. These vaults allocate capital across different lending markets to optimize returns, and users earn interest from borrowers who take out USDC loans via the platform. According to Coinbase, this approach enables users to benefit from a global set of borrowers, with no lock-up periods and automatic interest accrual. The product’s flexibility—allowing instant withdrawals—ensures that users can maintain liquidity while growing their balance continuously.

Coinbase has described the partnership as an example of what it calls the “DeFi Mullet”—a model that combines a fintech-like user experience with institutional-grade DeFi infrastructure. The platform has emphasized that this integration is the largest consumer-facing implementation of DeFi infrastructure to date, showcasing the potential for collaboration between fintech companies and DeFi protocols. The offering supports Coinbase’s vision of building a fully onchain product suite for both savings and borrowing, which the company views as essential to achieving its long-term goal of becoming the primary financial hub for its customers.

The launch is part of a broader trend in the crypto industry, where centralized platforms are increasingly leveraging DeFi protocols to enhance their offerings and provide better yields to users. As highlighted by the comparison of USDC interest rates across various platforms, the rates offered by Coinbase are among the most competitive in the market. Other platforms, both centralized and decentralized, offer varying APYs depending on market conditions and platform-specific policies. Notably, some DeFi protocols like Aave and Compound also offer dynamic interest rates based on real-time supply and demand for USDC, but they often come with higher risk profiles due to the nature of their smart contract-based systems.

The success of this product could further drive the adoption of stablecoins like USDC for yield-generating activities, particularly among users who prioritize security, transparency, and ease of use. Given the volatility of other cryptocurrencies, stablecoins provide a more predictable avenue for earning passive income, making them an attractive option for a growing segment of the crypto market. As USDC continues to gain traction, particularly in institutional and retail settings, its role in onchain financial systems is likely to expand, further cementing its position as a key asset in the evolving crypto ecosystem.

Morpho is now Powering USDC Lending on Coinbase [https://morpho.org/blog/morpho-is-now-powering-usdc-lending-on-coinbase/]

Compare USDC Interest Rates Across Centralized and DeFi [https://www.stablecoininsider.com/compare-usdc-interest-rates/]