Coinbase announced today it is expanding its crypto-backed lending service to include XRP, Dogecoin, Cardano and Litecoin, allowing eligible U.S. Customers to borrow up to $100,000 in USDC. The move, announced on X (formerly Twitter), provides users with a new avenue to access liquidity without selling their digital assets.
The lending service, powered by the decentralized finance (DeFi) protocol Morpho and operating on Coinbase’s Layer-2 Base network, is available to all U.S. Users except those in New York. Users can utilize their holdings in the four newly supported cryptocurrencies as collateral for the loans, according to the exchange.
This expansion builds on the success of Coinbase’s existing lending programs for Bitcoin and Ethereum, which have collectively originated over $1.9 billion in loans, according to a dashboard tracking the service. The addition of XRP, Dogecoin, Cardano, and Litecoin targets assets popular with retail investors, offering them a way to leverage their crypto holdings for real-world expenses.
Unlike traditional loans, borrowing against crypto assets through Coinbase may not immediately trigger a taxable event, although potential tax implications exist upon liquidation, according to the law firm Greenspoon Marder LLP. Liquidations occur when the value of the collateral falls below a certain threshold, potentially resulting in a taxable gain or loss.
The loan-to-value (LTV) ratio for loans backed by XRP, Dogecoin, Cardano, and Litecoin is capped at 49%, compared to 75% for Bitcoin, and Ethereum. Liquidation for these assets is triggered at 62.5% LTV, while Bitcoin and Ethereum loans face liquidation at 86%. Coinbase stated on X that the loans carry liquidation risk and does not provide tax advice.
Coinbase reported holding $17.2 billion in XRP on its platform as of December 31, 2023, in a filing with the Securities and Exchange Commission (SEC). The availability of lending against XRP could provide a new utility for these holdings.
The launch comes after a period of volatility in the crypto market, during which liquidations on the platform briefly spiked on February 6. A Coinbase spokesperson told Decrypt at the time that the company applies an additional margin to reduce liquidation risk and notifies borrowers when they approach the liquidation threshold, with updates as frequent as every 30 minutes. The exchange is too exploring additional measures to protect borrowers’ positions.
Approximately $170 million in crypto-backed loans were liquidated over a seven-day period around February 6, according to previous reporting by Decrypt. Coinbase continues to explore ways to enhance the lending product and mitigate risks for its users.
