Coinbase Unlocks ETH-Backed Loans: Liquidity Without Selling

Coinbase has introduced a new borrowing feature that lets eligible users use their Ethereum (ETH) as collateral to borrow the stablecoin USDC without selling any crypto. In other words, ETH holders can now unlock cash from their crypto holdings while keeping their ETH exposure.

According to Coinbase, customers can borrow up to $1 million in USDC against their ETH, providing instant liquidity for expenses or investments. Importantly, this process does not trigger a sale of the ETH (and thus not a taxable event); the ETH is simply held as collateral on-chain. As Coinbase’s product team notes, it lets “people … access liquidity without needing to sell the assets they believe in”.

If you believe in somΞTHing, this one's for you.

ETH-backed loans are here.

You can borrow USDC against your Ethereum, unlocking liquidity without selling.

Available now in the U.S. (ex. NY). pic.twitter.com/eOvJ2BWPfr
— Coinbase 🛡️ (@coinbase) November 20, 2025

How ETH Loans Work: Base, Morpho and Collateral

Under the hood, these loans run entirely on-chain via Coinbase’s partnership with the Morpho lending protocol on the Base network.

Base is Coinbase’s Ethereum Layer 2 (L2) network – a secure, low-cost blockchain built to scale decentralized apps. Morpho is a well-audited, permissionless on-chain lending protocol deployed on Base.

When a user takes out an ETH-backed loan, their ETH is wrapped (as WETH) and deposited into a Morpho smart contract on Base. In return they immediately receive USDC in their Coinbase account. Coinbase simply provides the user-friendly interface; the actual collateral and loans are managed by Morpho on the Base chain.

Borrowers can draw up to 75% loan-to-value (LTV) on their collateral. For example, $100 worth of ETH can borrow up to $75 in USDC. To avoid liquidation, users must keep their loan value below 86% of their collateral’s value. If ETH’s price falls and the LTV approaches 86%, the position can be automatically liquidated (selling collateral) to repay the loan.

There are no fixed monthly payments or deadlines – borrowers can repay whenever they want and incur interest only on the amount and time borrowed. As with Coinbase’s earlier Bitcoin loans, the ETH-backed loans carry competitive rates and no hidden fees.

Why It Matters: Liquidity, Tax Efficiency, and On-Chain Finance

This ETH-loan feature has practical benefits for holders. Instead of selling ETH to get cash (which could lock in gains and create a taxable event), users can keep their ETH invested and still cover expenses like a home down payment or debt refinancing. In effect, it “bridges traditional finance and decentralized finance” by giving users more control over their digital assets.

The loans also use USDC, a stablecoin pegged 1:1 to the U.S. dollar, which can be spent or moved with minimal volatility. Coinbase even notes that USDC redeems 1:1 for USD and is widely used, so borrowed funds can be sent globally or held in yield-bearing accounts.

The launch reflects a broader trend: on-chain lending and DeFi are rapidly growing. In Q3 2025, crypto-backed loans hit an all-time high of $73.6 billion, and decentralized platforms now hold more than half of that market. In Coinbase’s own Base ecosystem, on-chain lending has topped $1.27 billion, with about $800 million currently borrowed and over 13,300 active borrow positions. Coinbase’s previous Bitcoin loan product already saw $1.25 billion in borrowing by about 16,000 users, showing strong demand. These figures underline that institutional and retail users alike are embracing blockchain-native lending.

Coinbase plans to extend ETH loans further: today they use wrapped ETH (WETH) as collateral, but the company says support for staked ETH (their liquid staking token, cbETH) is coming soon. In short, Coinbase is letting long-term crypto holders tap into more liquidity on-chain, mirroring a wider shift toward decentralized finance tools in mainstream crypto services.

This means familiar names like Coinbase are adopting DeFi features under the hood. Without having to understand smart contracts, a Coinbase user can now take an on-chain loan – blending ease of use with the transparency and composability of Ethereum. This development highlights how on-chain finance is steadily bridging into everyday use, giving crypto holders new options for their assets.

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