Coinbase has now expanded its lending services to include some of the market's most popular altcoins.
The new feature makes it possible for U.S. customers to borrow against their holdings without triggering a taxable event or losing their market position.
XRP, Dogecoin (DOGE), Cardano (ADA), and Litecoin (LTC) are among the supported coins. Users can borrow up to $100,000 in USDC, the second-largest cryptocurrency.
Instant liquidity
The new feature is designed for speed and efficiency. Users will get "instant" liquidity with the help of their coins.
This crypto-backed facility allows investors to access cash (via the USDC stablecoin) immediately while keeping their long-term investment strategies intact. This sets Coinbase apart from traditional lending products that often require lengthy approval processes.
It is worth noting that the top US exchange has opted to rely on decentralized infrastructure to power the aforementioned product.
The exchange confirmed that the lending engine is "Powered by Morpho" and "Running on Base," Coinbase's own Layer-2 network.
This integration shows a growing trend of centralized exchanges (CEX) utilizing decentralized finance (DeFi) protocols to enhance user utility.
The service is available immediately to customers in the United States, with the notable exception of New York.
Various risks
Coinbase has also outlined some possible risks that are associated with crypto-backed lending.
These loans have variable interest rates, which means that market conditions could affect borrowing costs.
Furthermore, the exchange has pointed to the risk of collateral liquidation. If the value of the collateral assets drops significantly, users may need to add more funds. They also might end up selling their assets in order to cover the loan.
Vladislav Sopov
Dan Burgin