Coinbase has launched a new borrowing feature which allows the eligible U.S. users to borrow upto $1 million in USDC without selling or unstaking their ETH. The users can use the new product, cbETH, which is Coinbase’s token that represents the staked ETH as collateral to borrow USDC. This makes users continue earning staking rewards and maintain exposure to ETH’s price movement.
How Coinbase’s cbETH Borrowing Works
The users who hold the cbETH can deposit it as collateral on the coinbase and can borrow USDC against it. The borrowed USDC can be converted into U.S. dollars directly inside Coinbase. Depending on the collateral, the loans can go upto $1 million. The Loans are Overcollateralized which means the users must deposit more value than they borrow, with the interest changing based on the market conditions. Borrowers can repay part or the full amount of the loan at any time without a fixed repayment date. This lending system is powered by Morpho, an on-chain lending protocol.
Coinbase warns users to keep their loan-to-value below 86%. If the ETH price falls sharply, then the automatic liquidations will happen, and the borrowers should face the penalties. Because ETH is more volatile, borrowers must carefully manage the risks.
Staking ETH usually locks the funds for a long period. By allowing the cbETH to be used as collateral, users can keep their Ether exposure and access liquidity without selling during market downturns. This makes the staked Ether more flexible and useful for the long-term holders.
This launch shows how the crypto platforms are evolving beyond simple buying and selling. Tokenized staking products like cbETH are becoming more popular as investors are looking for ways to avoid locking their capital while still earning yield.
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