Ethereum News Today: Coinbase Bridges DeFi and Centralized Finance with $1M ETH Loans

Coinbase has launched a new Ethereum-backed loan product for eligible U.S. customers, enabling them to borrow up to $1 million in USDC without selling their ETH holdings, the cryptocurrency exchange announced. The service, available through its Layer 2 network Base and the on-chain lending protocol Morpho, marks one of Coinbase's largest decentralized finance (DeFi) integrations to date. The feature expands Coinbase's crypto-collateralized credit offerings, which previously included Bitcoin-backed loans with a $5 million limit.

The ETH-backed loan program allows users to deposit Ethereum as collateral and receive USDC liquidity without triggering taxable events, a key advantage over traditional crypto sales. Borrowers must maintain a loan-to-value (LTV) ratio below 86%, with automatic liquidation if ETH prices drop below this threshold due to market volatility. The service is currently unavailable in New York due to regulatory restrictions.

Coinbase's expansion into ETH-backed lending aligns with broader growth in on-chain lending markets. Onchain lending across the Base ecosystem has exceeded $1.25 billion, driven by institutional and retail demand. The integration with Morpho's infrastructure—where loans are executed via smart contracts— enables users to access DeFi liquidity through a centralized platform interface. This hybrid model addresses a growing need for liquidity among long-term ETH holders who prefer to retain exposure to the asset.

The product also highlights Coinbase's strategy to broaden its DeFi toolkit. The exchange plans to add support for staked ETH (cbETH) and other assets, catering to users seeking non-taxable borrowing options. Meanwhile, interest rates for these loans float based on supply and demand within the Morpho protocol, offering flexibility for repayment timelines.

Market participants have noted risks associated with the product. Sharp declines in ETH prices could shrink collateral buffers, potentially leading to liquidation or penalty fees. Users must actively monitor their positions to avoid such outcomes. Despite these risks, the service underscores Coinbase's position in the rapidly evolving crypto-native credit markethttps://crypto.news/coinbase-expands-crypto-credit-with-new-eth-backed-loans/.