Hassan Maishera
TL;DR
-
Coinbase users can now borrow USDC against bitcoin at a fixed interest rate and with a predetermined repayment date.
-
The service uses Morpho Midnight and operates alongside Coinbase’s variable-rate loans powered by Morpho Blue.
-
Coinbase’s existing variable-rate lending business has more than $1.4 billion in outstanding loans backed by about $3 billion in collateral.
Coinbase has introduced fixed-rate bitcoin-backed loans through Morpho Midnight, expanding borrowing options for customers who want liquidity without selling their crypto assets.
The new service allows eligible users to borrow the USDC stablecoin against bitcoin collateral. Both the interest rate and repayment date are established when the loan is created, giving borrowers greater certainty about the cost and duration of the debt.
Coinbase already offers variable-rate onchain loans through Morpho Blue. With the addition of Midnight, customers can choose between loans whose interest costs fluctuate with market conditions and loans whose terms remain fixed until maturity.
Fixed-Rate Loans Offer More Predictable Costs
Variable-rate loans are common across decentralized finance, but their borrowing costs can change as demand for capital and available liquidity shift. That flexibility can benefit borrowers when rates decline, although it also leaves them exposed to higher costs if market conditions tighten.
Morpho Midnight is designed to provide an alternative by matching borrowers and lenders at a fixed rate for a defined period. The protocol launched on Coinbase’s Base blockchain in July with the goal of bringing predictable rates and conventional maturity dates to onchain credit markets.
According to Coinbase, the new product gives customers another way to access cash-like liquidity while retaining exposure to their bitcoin holdings.
“Coinbase Borrow gives our customers access to liquidity without having to sell their assets, and fixed-rate borrowing gives them even greater choice over how they manage that credit,” Coinbase yield and investments product lead Jacob Frantz said.
The company did not disclose the specific interest rates available through Midnight. A Coinbase spokesperson said rates are determined by supply and demand, with lenders and borrowers submitting offers through an onchain order book.
That structure means the rates available to customers may vary between transactions, even though each borrower’s rate remains fixed after the loan begins.
Coinbase initially offers two maturity options: the end of the current month and the end of the following month. For the product, “End of Month” refers to the final Friday of the relevant month.
Borrowers must repay their USDC debt before the maturity date. If a loan remains unpaid after that deadline, its lender receives a claim against the collateral posted by the borrower.
The defined term makes the product function differently from many variable-rate DeFi loans, which may remain open indefinitely provided that borrowers maintain sufficient collateral and avoid liquidation.
Fixed maturities may help users plan their repayments, but they introduce a firm deadline. Borrowers must ensure they have enough USDC to repay the principal and interest on time, regardless of bitcoin’s price at maturity.
Bitcoin-backed borrowing also carries collateral risk. If the value of the pledged asset declines sharply, the position may become undercollateralized and subject to the loan’s applicable collateral-enforcement mechanisms.
Coinbase’s Variable-Rate Loan Business Tops $1.4 Billion
The Midnight integration builds on the growth of Coinbase’s existing onchain lending service. Its variable-rate loans, which use Morpho Blue, have expanded to more than $1.4 billion in outstanding debt backed by approximately $3 billion in collateral, according to Coinbase.
Morpho Blue is substantially larger across the broader Morpho ecosystem. The protocol reportedly has $5.2 billion in outstanding loans and $16 billion in deposits across all integrations. Those totals represent activity throughout the Morpho network and are not limited to Coinbase customers.
Midnight remains at an earlier stage of development, with approximately $30 million in deposits as it begins rolling out. A Morpho spokesperson said Coinbase is the first major consumer platform to offer Midnight-powered loans at scale.
Market makers also use the fixed-rate protocol, while Tenor Labs launched a lending platform built on Midnight in July.
The product divides responsibilities among three parties. Coinbase manages the customer-facing application, Morpho supplies the underlying lending protocol and the transactions settle on Base, Coinbase’s Ethereum Layer 2 network.
This arrangement enables Coinbase to present an accessible borrowing experience while using public blockchain infrastructure for loan execution and settlement.
It also extends the relationship between Coinbase and Morpho beyond variable-rate lending. The size of Coinbase’s existing loan book suggests the exchange could provide an important distribution channel as Midnight attempts to attract additional borrowers and lenders.
Morpho expects more platforms to integrate the protocol, although its spokesperson declined to identify prospective partners or provide a timeline.
Morpho Sees Wider Uses for Midnight
Beyond crypto-backed consumer borrowing, Morpho said Midnight could support structured credit products and loans secured by tokenized real-world assets.
Fixed rates and defined maturity dates may make onchain lending more familiar to institutions accustomed to traditional credit products. Tokenized Treasury securities, private credit instruments and other real-world assets could eventually serve as collateral for loans arranged through the protocol.
Those applications remain possible future uses rather than confirmed Coinbase offerings. For now, the integration gives Coinbase customers a more predictable alternative to its variable-rate loans while expanding Morpho Midnight’s reach into the consumer market.
