New Coinbase Feature Unlocks $1M Loans Using cbETH as Collateral
Coinbase has rolled out a new borrowing feature that lets customers unlock liquidity without parting with their ether, marking another step in the exchange’s push to make crypto assets more functional in everyday financial planning.
The product allows eligible U.S. users — with the exception of those in New York — to borrow up to $1 million backed by cbETH, Coinbase’s tokenized version of staked ETH.
The new service gives investors the ability to borrow USDC against their cbETH balance and convert the stablecoin into dollars directly within the platform. For long-term ETH holders, it presents a way to raise cash without selling tokens or unstaking from the Ethereum network — a process that otherwise forfeits staking rewards and exposes users to market-timing risk.
The launch is part of a growing trend across both centralized exchanges and decentralized finance: staked assets are no longer viewed as idle yield generators but as collateralizable instruments that can power more sophisticated financial activity.
As ether staking has matured into a longer-term strategy rather than a quick-yield play, many holders want access to liquidity without disrupting their on-chain positions.
Loans Powered by Morpho’s Onchain Architecture
Coinbase’s new borrowing feature is built on top of Morpho, an onchain lending protocol that enables overcollateralized lending through smart contracts.
Those loans carry variable interest rates that adjust with market conditions, and borrowers are free to repay at any time. There are no maturity dates or fixed amortization schedules, giving users flexibility in how they manage their debt.
According to a previously published Coinbase blog, borrowers must maintain a loan-to-value (LTV) ratio below 86% to avoid automatic liquidation. This threshold represents one of the key risks in borrowing against volatile crypto assets. Market downturns — particularly sharp ETH price moves — can quickly push LTV ratios into dangerous territory, resulting in forced liquidations and associated penalties.
Still, the ability to retain exposure to ETH’s potential upside while accessing liquid capital makes the offering attractive to many investors, especially as tokenized staking derivatives grow more mainstream.
Extending the Utility of Staked ETH
By accepting cbETH as collateral, Coinbase is broadening the utility of its staking product and expanding its appeal among users seeking capital efficiency. Staked ETH traditionally produced yield but left holders unable to leverage the asset without unstaking or relying on third-party DeFi protocols.
Now, Coinbase users can continue earning ETH staking rewards while freeing up funds for large purchases, diversification, portfolio rebalancing, or covering unexpected expenses. The move places Coinbase closer to a hybrid model where traditional financial services — such as collateralized loans — intersect with crypto-native assets.
Tokenized staking assets like cbETH have seen steady growth as more investors look to avoid the opportunity cost that comes with long lockups. In the current market cycle, capital efficiency has increasingly become a focal point for both centralized exchanges and DeFi platforms, leading to fierce competition in liquidity and collateral products tied to staked assets.
