Bitcoin News Today: Coinbase's Bitcoin Loans Bridge DeFi and Mainstream Finance

Coinbase's Bitcoin-backed loan program has surpassed $1 billion in originations since its January launch, signaling growing demand for crypto collateral in mainstream finance. The exchange plans to increase its maximum loan size from $1 million to $5 million in the coming weeks, reflecting confidence in the product's adoption. The average loan size currently stands at $54,000, with use cases including debt consolidation, medical expenses, real estate investments, and high-cost purchases. This expansion aligns with broader projections for the asset-based lending market, which a July report estimated could reach $1.3 trillion by 2030CoinDesk, ^[1].

The program leverages Coinbase's partnership with on-chain lending protocol Morpho, enabling users to borrow USDC against Bitcoin holdings without selling their assets. Loans are sourced through Morpho's billion-dollar onchain platform, with interest rates as low as 5% and no Coinbase fees. The exchange's mobile app interface allows U.S. users (excluding New York) to access liquidity while maintaining ownership of their crypto. A spokesperson noted that some clients are already borrowing against the current $1 million limit, underscoring the need for higher caps to meet demandCoinDesk, ^[1].

Institutional and retail interest in crypto-backed loans has surged as Bitcoin stabilizes above $90,000 and institutional capital flows into the sector. The product mirrors traditional secured lending models, such as home equity loans, by offering liquidity without asset liquidation. Coinbase's move to expand loan limits positions it to serve wealthier clients with larger Bitcoin holdings, further integrating crypto into conventional financial practices. The exchange's total trading volume hit $9.72 trillion in August 2025, the highest monthly figure of the year, reflecting broader market activityCoinDesk, ^[1].

The partnership with Morpho represents a strategic shift for Coinbase, which previously avoided direct lending operations. By plugging into Morpho's on-chain infrastructure, the exchange reduces custodial risks while leveraging decentralized finance (DeFi) protocols. Morpho's smart contracts manage collateral, payouts, and liquidations, with loans isolated by vaults to mitigate systemic risk. This hybrid model allows users to borrow on-chain while retaining trust in Coinbase's custodial safeguards, a critical factor for institutional adoptionGrowthscribe, ^[3].

Despite the growth, risks persist. Market volatility remains a key concern, as sharp Bitcoin price drops could trigger automatic liquidations. Protocol vulnerabilities and regulatory uncertainties, particularly in the U.S. and Asia, also pose challenges for institutional players. Additionally, while Coinbase's program avoids tax events for borrowers, regulatory scrutiny of crypto-asset collateralization could impact future adoption. Analysts emphasize that the success of crypto-backed loans will depend on maintaining stable collateral ratios and adapting to evolving compliance frameworksGrowthscribe, ^[3].

Coinbase's Bitcoin loan initiative highlights the maturation of crypto finance, bridging DeFi innovation with traditional lending needs. As the asset-based lending market expands, platforms like Coinbase are positioning themselves to capture a significant share by offering scalable, user-friendly solutions. With a $1.3 trillion industry target by 2030, the integration of crypto collateral into mainstream finance appears poised for sustained growth, provided market stability and regulatory clarity continue to evolveCoinDesk, ^[1].