Coinbase’s bitcoin-backed loans are just the start

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Coinbase is shaking things up. 

If you somehow didn’t hear, Morpho and Coinbase have teamed up to offer loans where Coinbase users (though New York users can’t, much to the disappointment of some of my colleagues) can borrow USDC against bitcoin held on Coinbase. Pretty cool, right? Definitely yet another sign of the changing times. 

Blockworks data whiz Dan Smith joined Empire’s round-up this week, telling host Jason Yanowitz that he thinks the announcement is a win for bitcoin… with some caveats.

“ Bitcoin’s money, they [Coinbase] want it to be everywhere,” Smith said. But the asterisk, as he called it, is that the loanee now has to trust that Morpho can hold that bitcoin as collateral on Base. This can, understandably, cause anxiety about that going wrong.

As Smith pointed out, the upside is that Coinbase is the largest centralized exchange in the US.

For some folks, that’ll be enough to entrust Morpho and Coinbase with holding their loaned bitcoin. 

There’s been a lot of demand for the product, according to Coinbase’s VP of Product Max Branzburg.

Smith, in the episode, also noted that the pairing of onchain lending startup Morpho and Coinbase here is a huge win for the former.

For Branzburg and Coinbase, Morpho was the go-to because it has “built some really great products in this area, and has built protocols that are very well audited that are safe, secure, [and] provide that kind of value.”

But he’s not ruling out the potential for other integrations with other projects. 

“As more people are building on base, we’ll find ways to bring Coinbase users to those builders,” Branzburg said. 

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Honestly, one of my burning questions personally was two-fold, why bitcoin, and is this only going to be a bitcoin offering? 

A few weeks ago, when I spoke with Haynes Boone partner Matthew Frankle, we discussed the rising appetite for bitcoin margin loans (which unfortunately didn’t make its way into this newsletter…yet). And now we have this big partnership announcement from Coinbase.

Branzburg’s simple answer to the first part is that bitcoin’s the “OG.” It’s really following the same formula Coinbase used when it announced its wrapped bitcoin product last year, which allowed folks to utilize their bitcoin exposure on Base.

“That was a pretty cool breakthrough a few months ago, but you still had to go take your bitcoin, get it into your wallet, navigate the protocols, figure out how to use it. What’s happening here is, under the hood, we’re doing all of that for you, abstracting all that complexity away,” he explained. 

Essentially, it gives customers a potential value add for their bitcoin (and keeps it from getting dusty, of course). 

Anyway, the last tidbit of information I gleaned was that bitcoin’s just the start for onchain lending via Coinbase.

“This roadmap will expand to other assets over time as well,” Branzburg told me.

So there you have it folks, Coinbase is going further onchain and, perhaps, just in time for crypto to have its moment in the spotlight.

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