Coinbase has announced the launch of its ETH-backed loans for eligible United States users. This fresh offering adds a powerful layer to the burgeoning on-chain lending sector as it provides ether holders the ability to borrow against their assets without ever selling them.

Image Source: Coinbase

Unlocking Liquidity Without Selling

One of the challenges facing crypto enthusiasts and long-term investors has been balancing the desire to hold onto appreciating assets and the need for liquid cash. With the new ETH-backed loan service, Coinbase customers can now use their ether (ETH) as collateral to borrow up to $1 million in USD Coin (USDC), the popular stablecoin. Importantly, this service is powered by Morpho. The interface, however, remains the familiar Coinbase platform, making it accessible even to non-technical users. The move aims to provide investors with flexible borrowing options for various life events, all without triggering a taxable event from selling their assets.

How It Works

To access ETH-backed loans, users simply pledge their wrapped ETH (WETH) as collateral through Coinbase's user-friendly dashboard. The platform then issues USDC, up to the $1 million cap, with a loan-to-value (LTV) ratio that can reach an impressive 75%. This structure means that for every $1,000 in ETH, an eligible user can borrow up to $750 in USDC, while retaining exposure to potential ETH price appreciation. Borrowers are required to carefully monitor the collateralization ratio because a sharp drop in ETH’s price could trigger automatic liquidation of the asset to protect the platform from losses. Interest rates are not fixed; rather, they fluctuate based on dynamic supply and demand within the Morpho protocol, ensuring a competitive borrowing environment. Loan repayment is similarly flexible: clients may pay back their loans at any time, reclaiming their full collateral plus any price gains realized in the interim.​

Market Impact

This announcement lands at a time when on-chain credit markets are breaking records. According to recent industry reports, total collateralized lending soared to $73.6 billion in Q3 2025, more than half of which now originates on decentralized finance (DeFi) platforms. This represents a dramatic shift from traditional, centralized crypto lenders to open, blockchain-based alternatives. Coinbase’s earlier foray into BTC-backed loans has already been a blockbuster: more than $1.25 billion has been borrowed by approximately 16,000 customers, backed with over $1.38 billion in collateral. The ETH-backed loan rollout is expected to fuel even greater adoption, with the company hinting at support for other assetsdown the road.​

What This Means for Crypto Investors

For many, this service will serve as a gateway into the world of DeFi with familiar guardrails provided by Coinbase. It opens the door to smart financial management, helping users unlock liquidity, diversify investments, avoid unnecessary asset sales, and manage cash flow efficiently. For Ethereum itself, lending use cases like these increase real-world utility and drive further adoption of the platform. However, it's not all risk-free. ETH price volatility remains a key factor, and borrowers must maintain healthy collateral ratios to avoid forced liquidation. Additionally, regulatory evolution in the crypto lending space will be one to watch as these products gain popularity.

Future Outlook

Coinbase’s new ETH loan feature solidifies its position at the forefront of crypto-financial services innovation in the US. It signals a continued migration of borrowing and lending out of walled gardens and into the open, transparent world of DeFi infrastructure.