Ethereum News Today: Coinbase Merges DeFi and Traditional Finance with ETH-Backed Loans

Coinbase has launched Ethereum-backed loans for U.S. users, marking a significant expansion into the crypto-native credit market. The service, available to customers in most U.S. states (excluding New York), allows borrowers to collateralize Ethereum (ETH) to receive up to $1 million in USDC stablecoin without selling their ETH holdings [according to reports]. This move builds on Coinbase's recent increase in Bitcoin-backed loan limits and underscores its strategy to integrate decentralized finance (DeFi) tools into its centralized platform [as research shows].

The loans are facilitated through Morpho, a lending protocol operating on Base, Coinbase's Ethereum layer 2 network. Users maintain exposure to ETH price movements while accessing liquidity, a feature designed to appeal to long-term holders seeking to avoid taxable events from asset sales [according to financial analysis]. Borrowers must maintain a loan-to-value (LTV) ratio below 86%; positions face automatic liquidation if collateral value dips below this threshold due to price volatility [as data indicates]. Coinbase also plans to expand the service to include cbETH, its staked-ETH derivative [according to company announcements].

Regulatory clarity has enabled this rollout. The Office of the Comptroller of the Currency's October 2025 guidance permits national banks to hold crypto collateral and process on-chain payments, removing prior restrictions on regulated on-chain lending [as regulatory documents show]. This aligns with broader industry trends, as institutions and retail users increasingly adopt collateralized borrowing. Onchain lending across the Base ecosystem has surpassed $1.25 billion, driven by institutional and retail demand [according to industry reports].

Coinbase's entry into ETH-backed lending reflects growing competition in the crypto credit space. Stablecoin issuer Tether recently invested in Bitcoin lending platform Ledn, while Wall Street firms like JPMorgan are allocating billions to private credit markets [as market analysis shows]. The crypto-native sector is also seeing momentum, with forecasts predicting the Bitcoin-backed lending market could reach $45 billion by 2030 [according to projections].

For Ethereum holders, the service offers a way to unlock liquidity without ceding ownership. Borrowers can use USDC for personal expenses or strategic trading during market volatility while retaining their ETH positions. However, risks persist: sharp price declines in ETH could trigger liquidations, and variable interest rates tied to Morpho's peer-to-pool model introduce repayment uncertainty [as financial reports indicate].

Coinbase's expansion into ETH-backed loans reinforces its "everything app" vision, aiming to consolidate trading, lending, staking, and DeFi access under one interface [as company updates state]. The company also recently restored staking in New York and acquired token-launch platform Echo, signaling its commitment to diversifying services [according to company announcements]. As crypto markets navigate regulatory and price volatility, Coinbase's move highlights the growing demand for hybrid financial tools that bridge traditional and decentralized finance.