Coinbase Lets Users Earn 10.8% Yield by Lending USDC via DeFi Pools

Coinbase has introduced a new feature that allows users to lend their USDC stablecoin holdings onchain, offering an annual yield of up to 10.8%. This initiative is powered by Morpho, a decentralized lending protocol, and is facilitated through Steakhouse Financial on Base, the Ethereum Layer 2 network incubated by Coinbase. The service enables users to earn passive income by routing their USDC deposits across optimized lending pools via a smart contract wallet. According to Coinbase, this process is designed to maximize returns while maintaining accessibility for mainstream users through its familiar application interface.

The new offering distinguishes itself from Coinbase’s existing “USDC Rewards” program, which currently provides a 4.1% yield (4.5% for Coinbase One members). By leveraging DeFi protocols, Coinbase users can now access significantly higher returns. A Coinbase spokesperson clarified that the “USDC Rewards” program is a customer loyalty initiative funded by the company’s marketing budget and does not involve the lending of user assets. The onchain lending feature, on the other hand, utilizes user assets directly through the DeFi ecosystem to generate higher yields.

The feature is currently available to a limited group of users and is set for a broader rollout across the U.S. (excluding New York), Bermuda, and other international markets such as China Hong Kong, the United Arab Emirates, New Zealand, the Philippines, and South Korea. This expansion aligns with Coinbase’s broader strategy to connect users more directly with the onchain economy, enhancing the utility of its platform in the decentralized financial ecosystem.

Coinbase’s collaboration with Morpho is not new; earlier this year, the exchange introduced Bitcoin-backed onchain loans through the same protocol, allowing users to borrow up to $1 million in USDC against their Bitcoin holdings on Coinbase. This was a significant increase from the previous $100,000 limit. Furthermore, last month, Coinbase launched its second Stablecoin Bootstrap Fund, aiming to enhance stablecoin liquidity across DeFi protocols. The initiative, managed by Coinbase Asset Management, is designed to expand access to stablecoins and stabilize interest rates in decentralized markets.

The growth of DeFi lending protocols is also reflected in the broader market. As of recent data, the total value locked (TVL) in DeFi lending has reached a record $55.69 billion. Protocols such as Aave v3, Morpho Blue, and Maple Finance have contributed to this surge. Morpho Blue, in particular, has seen a 38% year-to-date increase in TVL, reaching $3.9 billion. Maple Finance has experienced even more rapid growth, with its TVL now at $1.37 billion, a 417% increase since the beginning of the year.

The success of these DeFi protocols has not gone unnoticed by institutional players. The U.S. and European Union have introduced regulatory frameworks that aim to balance innovation with consumer protection and compliance requirements. For example, the U.S. GENIUS Act mandates that stablecoins maintain a 1:1 backing with low-risk assets and undergo regular audits. In the European Union, MiCA has established a comprehensive regulatory structure for crypto-asset service providers. These developments are fostering institutional confidence, encouraging adoption, and promoting the integration of DeFi into the broader financial system.