Essential: Coinbase Expands Onchain Loans to Include XRP, DOGE, ADA, and LTC as Collateral

San Francisco, May 2025: In a significant move for decentralized finance accessibility, Coinbase has expanded its onchain lending services. The platform now allows eligible U.S. customers to use four major alternative cryptocurrencies—XRP, Dogecoin (DOGE), Cardano (ADA), and Litecoin (LTC)—as collateral to secure loans of up to $100,000 in USDC. This expansion, facilitated through a partnership with the decentralized lending protocol Morpho, marks a pivotal step in bringing sophisticated DeFi mechanisms to a broader retail audience through a trusted, regulated gateway.

Coinbase Onchain Loans: A Deep Dive into the New Collateral Options

Coinbase’s onchain loans product, initially launched with Bitcoin and Ethereum as the sole collateral options, represents a bridge between traditional centralized finance (CeFi) convenience and decentralized finance (DeFi) infrastructure. The service operates by allowing users to lock their cryptocurrency assets in a smart contract on the Base blockchain, which is Coinbase’s layer-2 network. Through an integration with Morpho Blue, a permissionless lending protocol, these locked assets then serve as collateral for a loan denominated in USDC, a regulated stablecoin pegged to the U.S. dollar.

The recent expansion to include XRP, DOGE, ADA, and LTC is notable for several reasons. Firstly, it significantly increases the utility of these assets for their holders, who can now access liquidity without triggering a taxable selling event. Secondly, it reflects Coinbase’s confidence in the market stability and technical robustness of these specific blockchains. The selection includes assets from diverse technological backgrounds: XRP from Ripple Labs, focused on cross-border payments; Dogecoin, originally a meme coin with a massive community; Cardano, a proof-of-stake blockchain emphasizing peer-reviewed research; and Litecoin, one of the earliest Bitcoin forks designed for faster transactions.

Eligibility for the service is currently restricted to U.S. customers in most states, with notable exclusions including New York due to its stringent BitLicense regulations. The loan-to-value (LTV) ratios, which determine how much USDC can be borrowed against the value of the collateral, are set conservatively by the Morpho market and are subject to change based on market volatility and liquidity. This structure is designed to protect both the borrower and the lending pool from sudden market downturns that could trigger automatic liquidations.

Technical Mechanics and the Role of the Morpho Protocol

The backbone of this expansion is the Morpho Blue protocol. Unlike earlier DeFi lending models that used pooled liquidity, Morpho Blue utilizes isolated markets. This means a specific, custom market is created for each collateral and debt asset pair. For Coinbase, this allows precise risk parameter management for each new collateral type, such as XRP/USDC or DOGE/USDC. The protocol’s non-custodial nature means Coinbase never directly controls the user’s collateral; it remains secured in a transparent, auditable smart contract.

The process for a user involves several clear steps:

• Initiation: A user selects their collateral asset (e.g., ADA) within their Coinbase account and specifies the loan amount in USDC.
• Collateral Locking: The specified ADA is transferred from the user’s Coinbase wallet to the designated Morpho Blue smart contract on the Base network.
• Loan Disbursement: Upon successful collateralization, the borrowed USDC is minted and sent to the user’s wallet, available for withdrawal or further use.
• Management & Repayment: Users can monitor their loan health, including the LTV ratio, through the Coinbase interface. To reclaim their collateral, they must repay the USDC principal plus the accrued, variable interest.

This architecture offers distinct advantages. It provides greater capital efficiency for lenders and more tailored risk settings. For the borrower, it means interacting with a complex DeFi mechanism through a simplified, familiar interface that handles wallet creation, gas fees, and smart contract interactions seamlessly.

Market Context and Strategic Implications for Crypto Finance

This expansion does not occur in a vacuum. It follows a broader industry trend where major centralized exchanges are integrating DeFi services to retain users and create new revenue streams. By offering these loans, Coinbase provides a compelling alternative to selling assets for cash needs, which can be a taxable event. It also positions these four cryptocurrencies as more financially productive assets, potentially influencing their long-term holder behavior.

Historically, accessing DeFi lending required technical know-how concerning self-custody wallets, gas fees, and protocol navigation—a barrier for many. Coinbase’s integration dramatically lowers this barrier. However, it introduces a trade-off: users cede some decentralization benefits for ease of use and customer support. The risks, including smart contract vulnerability, market volatility leading to liquidation, and the variable interest rates, remain present and are clearly disclosed in the service’s terms.

The move also signals growing institutional and regulatory comfort with the underlying assets, particularly XRP, which has seen significant legal clarity following Ripple’s partial victory in its case with the U.S. Securities and Exchange Commission. Including it as approved collateral is a substantive endorsement of its regulatory status from a publicly traded U.S. company.

Conclusion

Coinbase’s expansion of its onchain loans to include XRP, Dogecoin, Cardano, and Litecoin is a multifaceted development in cryptocurrency finance. It enhances the utility of these major altcoins, democratizes access to advanced DeFi lending mechanisms, and strengthens Coinbase’s ecosystem by leveraging the Base network and Morpho protocol. For the average user, it represents a new, powerful tool for managing cryptocurrency portfolios. For the industry, it underscores the continuing convergence of centralized and decentralized financial services, creating more robust, accessible, and integrated financial products for the digital asset economy. As the landscape evolves, the performance and adoption of these Coinbase onchain loans will be a key indicator of mainstream readiness for blockchain-based financial primitives.

FAQs

Q1: What are Coinbase onchain loans?
Coinbase onchain loans are a service that lets you borrow USDC stablecoin by using your cryptocurrency as collateral. The assets are locked in a decentralized smart contract on the Base blockchain via the Morpho protocol, and you receive a loan without having to sell your crypto.

Q2: Which cryptocurrencies can I now use as collateral?
As of this expansion, you can use Bitcoin (BTC), Ethereum (ETH), XRP (XRP), Dogecoin (DOGE), Cardano (ADA), and Litecoin (LTC) as collateral for an onchain loan through Coinbase.

Q3: Who is eligible for this service?
The service is currently available to most U.S. Coinbase customers. It is not available to residents of New York state or to users outside the United States. You must have a verified Coinbase account and hold one of the supported assets.

Q4: What are the risks of taking an onchain loan?
The primary risks are market volatility and liquidation. If the value of your collateral falls significantly relative to your loan, the protocol may automatically sell (liquidate) some of your collateral to repay the loan to protect lenders. You are also responsible for paying variable interest on the borrowed USDC.

Q5: How does Coinbase’s service differ from using DeFi directly?
Coinbase provides a streamlined, user-friendly interface that handles wallet setup, gas fees, and complex smart contract interactions. Using DeFi protocols like Morpho directly offers more control and potentially better rates but requires technical knowledge and full self-custody of assets.

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