Coinbase Launches cbETH-Backed Loans
Coinbase has introduced a new borrowing feature that allows eligible customers in the United States to take out loans of up to 1 million dollars in USDC using cbETH, the platform’s staked Ethereum token, as collateral. This setup lets users keep exposure to ETH price movements and continue earning staking rewards while accessing cash, helping them avoid potential capital gains events from selling their holdings.
How the Borrowing Mechanism Works
When a user opts to borrow, their cbETH is locked into a smart contract on the Base network, where it serves as collateral for a USDC loan. The borrowed USDC is credited immediately and can be converted into U.S. dollars on Coinbase for spending, investing, or other purposes. There is no fixed repayment schedule, but borrowers must closely monitor their loan-to-value ratio to stay within platform limits.
Risk Management, LTV Limits and Liquidations
Coinbase initially caps the maximum loan-to-value (LTV) ratio at 75 percent, and borrowers are required to keep it below 86 percent to avoid automatic liquidation. If the price of Ethereum falls and the LTV climbs above the threshold, liquidators on the underlying protocol can repay part of the debt and claim some of the cbETH collateral for a fee, effectively closing risky positions. Interest rates on these loans are variable and are set by market conditions on Morpho, meaning costs can rise during periods of high volatility or stress.
Morpho’s Role and On-Chain Growth
The lending engine behind the feature is Morpho, an on‑chain lending protocol that coordinates deposits, loans and liquidations via smart contracts and oracle price feeds. By January 2026, Morpho had already processed around 125 billion dollars in on‑chain volume within the Base ecosystem, underscoring the scale of DeFi activity that Coinbase is tapping into. Coinbase plans to expand its collateral options beyond cbETH over time, building on its existing Bitcoin‑backed loans that can reach up to 5 million dollars.
Ethereum Staking and Market Backdrop
The launch comes amid strong growth in Ethereum staking: by mid‑January 2026, roughly 36 million ETH was staked, about 30 percent of the circulating supply, with a total value above 118 billion dollars at prevailing prices. Stakers currently earn around 3 percent APR, while on‑chain activity has surged, with daily active addresses up more than 100 percent year‑over‑year and new addresses doubling month‑over‑month to 8 million. At the same time, ETH’s price has been volatile, trading in a band around 2,900 to 3,000 dollars with key support near 2,850 dollars and resistance in the 3,000 to 3,300 dollar area, making risk management critical for borrowers using ETH as collateral.
Who Can Use the New Feature
The cbETH‑backed borrowing product is currently available to verified Coinbase users in most U.S. states, excluding New York due to regulatory restrictions. As Ethereum adoption and DeFi lending continue to grow, Coinbase’s integration with Morpho positions the exchange as a bridge between retail users and on‑chain credit markets, offering a more accessible way to unlock value from staked assets without leaving the platform.
