MORPHO Expands Crypto-Backed Lending to XRP, DOGE, ADA, and LTC via Coinbase Integration

Coinbase now allows XRP, DOGE, ADA, and LTC as collateral for USDC loans up to $100,000 via the Morpho on-chain lending protocol according to Cryptonews.

The service enables users to access liquidity without selling their tokens, potentially avoiding capital gains tax and supporting DeFi growth as reported.

The expansion reflects a growing trend in crypto-backed borrowing, with over $1.9 billion in loans originated on the platform according to Crypto.news.

Coinbase has expanded its USDC-based lending service to include XRP, DOGE, ADA, and LTC as collateral, joining Bitcoin and Ethereum in its offering as detailed. This update allows eligible users to borrow up to $100,000 in USDC without selling their holdings. The loans are processed through the Morpho protocol on Coinbase's Base layer-2 network, enabling on-chain collateral management and smart contract automation according to AInvest.

The feature is particularly relevant for investors who hold assets like XRP, DOGE, ADA, and LTC, which do not support native staking yield. By enabling lending against these tokens, Coinbase provides a method for long-term holders to access liquidity without liquidating their positions as noted. This aligns with broader trends of using DeFi protocols to diversify the utility of digital assets according to Bitcoin News.

However, the service comes with certain limitations. The maximum loan-to-value (LTV) ratio for these tokens is 49%, with liquidation initiated at 62.5% of the loan value according to Crypto.news. This is lower than the LTV ratios for Bitcoin and Ethereum, reflecting the higher volatility of the supported tokens. Users must also pay a one-time fee, and liquidation risks persist if the value of the collateral drops significantly as reported.

How the Morpho Protocol Facilitates On-Chain Lending

The Morpho protocol manages the rules for these loans on-chain, ensuring transparency and reducing counterparty risks according to Cryptonews. By operating on Base, Coinbase's Ethereum-compatible layer-2 network, the protocol supports wrapped versions of the collateral tokens as detailed. This allows users to maintain their exposure to the underlying assets while accessing liquidity. The use of smart contracts automates the enforcement of loan terms and liquidation conditions, reducing manual intervention according to Cryptonews.

The integration of Morpho into Coinbase's lending platform highlights the growing intersection between centralized finance (CeFi) and decentralized finance (DeFi) according to AInvest. The protocol's on-chain collateral management aligns with industry preferences for trustless, automated financial systems according to Bitcoin News.

Key Risks and Limitations of the New Lending Feature

Despite the benefits of accessing liquidity without selling tokens, the new lending feature introduces risks. If the price of the collateral tokens drops sharply, the user's position can be automatically liquidated as reported. This could create additional downward pressure in market downturns. Additionally, the service is not available in New York, limiting access for some users according to Crypto.news.

Another consideration is the one-time fee charged to borrowers, which may reduce the net liquidity available. While this is standard in crypto lending, users should carefully calculate the costs before borrowing according to Crypto.news. The service also does not allow funds to be used for trading on Coinbase, limiting the flexibility of the borrowed capital according to Crypto.news.

Overall, the expansion of Coinbase's lending program to include XRP, DOGE, ADA, and LTC reflects a broader industry shift toward crypto-backed borrowing according to Bitcoin News. It also highlights the role of DeFi protocols like Morpho in enabling new financial services for crypto holders according to AInvest.