Coinbase has taken a significant step in the digital finance sector by launching on-chain decentralized finance (DeFi) lending, enabled through a partnership with the Morpho protocol. This new offering allows millions of Coinbase users to loan their USDC and earn competitive yields, reaching rates of up to 10.8% APY.
Available in the U.S. (excluding New York), Bermuda, and selected regions, this product is notable for being the first instance where Coinbase customers can engage in a fully on-chain, open lending market while still maintaining the security and user-friendly experience provided by the established centralized platform.
The Morpho protocol serves as the backend infrastructure for this lending feature. When users deposit USDC, their assets are organized into curated on-chain “vaults” managed by Steakhouse Financial. This structure diversifies lending activities and optimizes returns, ensuring that borrowers—often other Coinbase users availing of crypto-backed loans—pay interest that is directly distributed to USDC holders. A significant benefit of this system is the absence of deposit lockups and instant withdrawals when liquidity is available, providing users both flexibility and attractive rewards.
By integrating Morpho, Coinbase is adopting what is being referred to as a “DeFi mullet” strategy—offering a user-friendly financial interface up front, while leveraging robust, permissionless DeFi protocols behind the scenes. This approach signifies a cultural shift within the finance sector, as decentralized finance, once accessible only to crypto enthusiasts, begins to gain traction among mainstream users. Coinbase CEO Brian Armstrong has expressed the belief that “the future of finance is on-chain, but accessed through trusted interfaces,” a perspective that is now materializing for USDC holders.
The integration with Morpho also aligns Coinbase’s existing suite of crypto-backed loan products with public lending markets for the first time. More than $900 million in loans have already been facilitated through Coinbase using Morpho, reinforcing the protocol’s position as a foundational element for next-generation financial services.
In light of the $73 billion USDC market’s search for low-risk investment avenues in an unpredictable yield landscape, Coinbase’s on-chain lending provides users with innovative opportunities to utilize their capital. This offering simplifies the process for individuals who may be wary of managing DeFi wallets or navigating unfamiliar interfaces. Additionally, users can feel secure knowing that Coinbase’s lending operations are anchored in Morpho’s rigorously tested smart contracts and have undergone third-party audits.
