Coinbase has taken another decisive step in expanding Coinbase crypto lending, allowing eligible U.S. users to borrow up to $1 million in USDC using staked ether as collateral, without selling their ETH or exiting staking.
The new feature lets users borrow directly against cbETH, Coinbase’s wrapped representation of staked ether. The loans are issued inside the Coinbase app, powered by on-chain infrastructure, and settled in USDC. For many long-term ETH holders, this marks the first time staked ether can be used as practical, large-scale collateral inside a major regulated platform.
At its core, this update turns staked ETH from a passive yield asset into usable credit. Let’s take a look at how Coinbase crypto lending is reshaping access to cash without selling ETH.
What changed and why it matters now
For anyone holding Ethereum, accessing its value has long felt like a no-win choice. You could sell your ETH and get cash in hand, but that decision comes with a tradeoff. Once you sell, you lock in today’s gains and give up any chance to benefit if prices move higher tomorrow. The alternative has usually been DeFi lending, which is rarely simple. It means dealing with unfamiliar tools, managing wallets and smart contracts, watching prices closely, and reacting fast when markets move. For many people, that path requires constant attention, technical confidence, and comfort with risk, all without the support systems or reassurance they expect from more traditional financial services.
With this update, Coinbase crypto lending bridges that gap. Eligible users can now borrow USDC while keeping their ETH staked, earning staking rewards in the background, and avoiding a taxable sale in Coinbase’s own accounting treatment.
The loan cap is set at $1 million for ETH-backed loans, while Bitcoin-backed loans on Coinbase go as high as $5 million. The service is currently available to verified U.S. customers, excluding New York, a restriction that reflects state-level differences in lending and crypto rules.
How the loans work in simple terms
The mechanics are straightforward by crypto standards.
A user holds cbETH, which represents ETH they previously staked through Coinbase. When they request a loan, Coinbase moves that cbETH on-chain and locks it as collateral through Morpho, a decentralized lending protocol, on Base, Coinbase’s layer 2 network.
The user receives USDC directly into their Coinbase account, where it can be used immediately. The interest rate is not fixed. It moves with market conditions and can rise or fall over time. As long as the loan remains in good standing, the user keeps full exposure to ETH and continues earning staking rewards through cbETH in the background.
The main risk comes from price swings. Coinbase explains that the loan must stay below an 86 percent loan-to-value ratio. If the price of ETH drops sharply, or if interest builds up and pushes the ratio too high, the system can trigger an automatic liquidation and apply fees.
In practice, this setup follows the same logic used in decentralized finance, but it is delivered through a familiar, centralized Coinbase interface that removes much of the technical friction for everyday users.
Coinbase’s broader strategy comes into focus
The product matters. The structure matters more. Coinbase crypto lending no longer looks like a traditional lending business. Coinbase is not quietly rehypothecating assets or running opaque credit books. Instead, it acts as the access layer. The rules live on-chain. Collateral is locked in smart contracts. Liquidity comes from decentralized markets.
Users open the same app they have always used. Most never see the blockchain activity underneath. Coinbase handles compliance, onboarding, and support. The actual credit engine runs elsewhere.
That design choice is not accidental. After 2022, it became clear that black-box crypto lending was not sustainable. When things broke, users had no visibility and no recourse. This time, the system is built with transparency and automation from the start. Liquidation thresholds are known. Collateral is visible. Risk is enforced by code, not promises. By leaning on Morpho and Base, Coinbase is signaling where its financial products are headed. More on-chain. Less discretionary. Harder to hide problems.
Why New York remains excluded
New York’s absence from the rollout is intentional. Crypto lending, staking, and yield products face far stricter oversight under state-level financial rules. Coinbase already provides staking services in New York under clearly defined conditions, but borrowing against crypto is treated as a separate and more tightly regulated activity.
The exclusion underscores a broader reality for U.S. users. Access to advanced crypto products is increasingly shaped by location, even within the same national market.
Market impact: ETH becomes productive capital
Beyond the news, the market implications are significant.
For years, staking ETH meant locking capital for yield. Liquidity came at the cost of unstaking or selling. By allowing users to borrow against staked ETH, Coinbase crypto lending changes that equation.
Staked ether now behaves more like productive capital. It earns yield and can be leveraged for liquidity at the same time.
This could reduce selling pressure during market downturns. Instead of selling ETH to raise cash, holders may choose to borrow. Over time, this dynamic may support ETH prices during periods of stress, though it introduces leverage into the system.
Effects on cbETH and DeFi lending markets
cbETH itself is likely to draw more attention because of this. If borrowing against staked ETH becomes a habit, some users may choose Coinbase staking from the start, knowing they can tap liquidity later without having to sell. For long-term holders, that kind of optionality often matters just as much as the yield itself.
The impact does not stop there. This shift also flows into DeFi lending markets. As Coinbase routes more borrowing through Morpho, demand for liquidity could begin to influence interest rates across several protocols. Longstanding DeFi lenders may see pressure on margins, even as overall usage and on-chain activity continue to grow.
At the same time, larger borrowing limits designed for retail users raise broader system questions. When leverage grows during volatile markets, liquidations can accelerate quickly, even when automated risk controls are in place.
A more transparent version of old crypto credit
Comparisons to pre-2022 crypto lending are inevitable. The difference this time is visibility. Collateral, liquidation thresholds, and mechanics are on-chain. Users can see how the system works, even if they never touch a wallet.
That transparency does not eliminate risk, but it changes how risk is understood and priced.
What to watch next
The next phase will answer the real questions. Will rates stay competitive as demand grows? How will the system behave during sharp ETH drawdowns? Will Coinbase expand Coinbase crypto lending to new assets or new regions?
What is already clear is that this is not a cosmetic update. Coinbase is redefining how long-term crypto holdings are used. For ETH holders who intend to stay invested, borrowing against staked ether offers a way to raise cash without stepping out of the market. That shift, more than the headline, is what will linger.
