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Coinbase has launched a lending service allowing users to borrow up to $1 million in USDC using their staked ether as collateral—without unstaking or losing staking rewards.
The product, now available to most U.S. users outside New York, routes loans through Morpho, a decentralized lending protocol, marking Coinbase’s latest push to blend centralized exchange infrastructure with DeFi liquidity mechanisms.
With Coinbase ether lending, borrowers can request USDC loans capped at $1 million, depending on the amount of eligible cbETH posted as collateral and the platform’s loan-to-value (LTV) requirements.
Once approved, funds are credited instantly to the user’s Coinbase account.
The collateral is transferred on-chain to Morpho, a decentralized lending protocol that facilitates overcollateralized crypto loans via smart contracts.
Coinbase confirmed that users must maintain an LTV ratio below 86% to avoid automatic liquidation—an important caveat given Ether’s price volatility.
“Crypto markets move fast, and borrowers should be aware that extreme ETH price swings could pressure collateral ratios,” Coinbase noted in its product documentation.
The launch significantly expands the utility of cbETH beyond passive yield. With Coinbase ether lending, users can continue earning staking rewards while unlocking liquidity for portfolio rebalancing, large purchases, or short-term expenses—capabilities traditionally reserved for institutional crypto lending desks.
This hybrid approach places Coinbase at the center of a growing trend: merging regulated exchange infrastructure with DeFi-powered liquidity rails.
The rollout comes as Coinbase navigates heightened regulatory friction in Washington. While the exchange recently secured approval to launch staking services in New York—now available in 46 U.S. states—broader crypto legislation remains uncertain.
Coinbase CEO Brian Armstrong recently withdrew support for a draft version of the Clarity Act, a proposed crypto market structure bill. Speaking on FOX Business, Armstrong argued the bill undermines competitive fairness.
“It just felt deeply unfair to me that one industry bank would come in and get to do regulatory capture to ban their competition,” Armstrong said. “They should have to compete on a level playing field.”
Robinhood CEO Vlad Tenev echoed support for staking innovation, calling it one of the most requested features from users.
“The U.S. needs legislation that protects consumers while enabling innovation to move forward,” Tenev wrote on X, urging states with staking restrictions to reconsider.
Blockchain policy advocate Ron Hammond estimates a 40% chance the market structure bill passes, noting ongoing compromises in Congress.
“The question is, how far can they bend this bill before it breaks?” Hammond said.
Despite its promise, Coinbase ether lending is not without downside. Ether’s volatility remains a core risk, and sudden market drawdowns could trigger forced liquidations.
Additionally, the reliance on third-party DeFi protocols introduces smart contract and systemic risk—factors Coinbase users must weigh carefully.
Still, stablecoins already account for nearly 20% of Coinbase’s revenue, totaling $355 million in Q3 2025, underscoring why the company is doubling down on crypto-native financial products.
At its core, Coinbase ether lending represents a pivotal moment for retail crypto finance—bringing advanced DeFi borrowing tools to mainstream users, while spotlighting the fine balance between innovation, regulation, and risk.
If successful, it could redefine how staked assets are used across the crypto economy. If not, volatility and policy headwinds may yet test its limits.
