Coinbase added XRP, Dogecoin, Cardano, and Litecoin as collateral on its Morpho-backed lending product. Borrow up to $100K USDC without selling—$1.9B originated so far.
Coinbase expanded its crypto-backed lending product to include XRP, Dogecoin, Cardano, and Litecoin as eligible collateral, allowing US users to borrow up to $100,000 in USDC without selling their holdings. The announcement came Wednesday, marking the latest expansion of a product that's already generated over $1.9 billion in loan originations since launching with Bitcoin support last year.
The four newly supported assets have a combined market cap of roughly $117 billion. Coinbase itself reported holding $17.2 billion in XRP on its platform as of December 31, according to recent SEC filings. That's a lot of dormant capital that could now be put to work through leverage without triggering immediate capital gains taxes.
The lending product runs through Morpho, a DeFi protocol built on Coinbase's Base layer-2 network. Users don't interact with Morpho directly—Coinbase provides the interface, handles onboarding, and wraps the collateral assets into on-chain equivalents that get deposited into Morpho's smart contracts. When you pledge XRP as collateral, for example, it gets converted into cbXRP and transferred to Morpho's vault. If you repay the loan, the collateral returns to your Coinbase account.
Interest rates aren't fixed. They're set by supply and demand on Morpho's protocol. When borrowing demand rises relative to available USDC, rates go up. When demand falls, rates drop. There's no repayment schedule—you can hold the loan indefinitely as long as your loan-to-value ratio stays healthy.
That's where the risk structure differs by asset. Bitcoin and Ethereum borrowers can draw up to 75% LTV, with liquidation triggered at 86%. That's a relatively generous buffer. XRP, Dogecoin, Cardano, and Litecoin loans max out at 49% LTV, with liquidation hitting at 62.5%. The tighter ratios reflect Morpho's assessment of higher volatility risk in these assets compared to BTC and ETH.
Liquidation happens automatically through Morpho's protocol. If your collateral value drops and your LTV crosses 62.5%, third-party liquidators step in, repay your loan, and take your collateral at a discount. The remaining collateral after liquidation gets returned to your Coinbase account, but you've lost a chunk to the penalty fee.
That risk became visible earlier this month when the product experienced a wave of liquidations during a market correction. The mechanics worked as designed—loans were closed, collateral was sold, users took losses—but it highlighted that borrowed leverage amplifies downside as much as it amplifies upside.
Still, for holders who want liquidity without selling, the structure makes sense. XRP, DOGE, and LTC don't have native staking on their networks, which means there aren't many ways to generate yield or liquidity from these assets without trading them. Cardano does have staking, but it's not as liquid as borrowing stablecoins against the position.
The product originated $1.9 billion in loans across all supported assets since launching. Bitcoin remains the dominant collateral type—users can borrow up to $5 million in USDC against BTC, compared to $1 million against ETH and $100,000 against the newly added altcoins. That tiering reflects both risk appetite and market depth.
Coinbase charges a one-time origination fee every time you borrow, even when adding to an existing loan. That fee gets added to your principal, which means interest accrues on both the borrowed amount and the fee. Loan proceeds can't be used for trading on Coinbase—they're designed for off-platform use, like funding large purchases, refinancing debt, or covering expenses without liquidating crypto positions.
The product is available to verified US users, excluding New York residents. International expansion is planned but hasn't been announced yet. Morpho's protocol is permissionless, but Coinbase's interface adds compliance layers that restrict access based on jurisdiction.
The broader context here is that crypto-backed lending hit $73.6 billion in outstanding loans during Q3 2025, the highest quarter-end figure on record, according to Galaxy Research. That's driven partly by regulatory clarity under the new administration and partly by improved infrastructure like Morpho, which makes it easier for centralized platforms to offer DeFi products without managing risk directly.
Coinbase's "DeFi mullet" strategy—centralized front-end, decentralized back-end—has been effective. Users get the familiar Coinbase interface, instant liquidity, and customer support. The actual lending happens on-chain through Morpho's smart contracts, which means transactions are transparent, verifiable, and don't require trust in Coinbase as a custodian of the loan itself.
That separation matters legally. Coinbase isn't lending directly, which would trigger different regulatory requirements. It's providing a UI that connects users to a permissionless protocol. That distinction allowed the product to launch without facing the same scrutiny that shut down Coinbase's earlier retail lending product in 2023 during the SEC's enforcement campaign.
The addition of XRP, DOGE, ADA, and LTC expands the addressable market significantly. Combined with Coinbase's earlier launch of wrapped versions of these tokens on Base, the infrastructure is starting to connect previously siloed ecosystems. Holders can now move assets between chains, use them as DeFi collateral, earn yield, or borrow against them—all without leaving Coinbase's platform.
Whether the demand materializes depends on a few factors. First, whether altcoin holders actually want leverage. Bitcoin holders who borrowed against their positions in 2024 and 2025 generally believed BTC would appreciate faster than their interest rate. That thesis worked during rallies but hurt during corrections. Altcoin volatility is higher, which makes leveraged bets riskier.
Second, whether users trust the liquidation mechanics. Morpho's protocol is audited and battle-tested, but automated liquidations during flash crashes can wipe out positions faster than users can react. The 62.5% liquidation threshold on altcoins is tighter than BTC's 86%, which means less room for error.
Third, whether the tax treatment holds up. Coinbase states that borrowing against crypto isn't treated as a taxable event, which is consistent with how collateralized loans work in traditional finance. But if you get liquidated, that forced sale could create a tax obligation, according to legal guidance from firms like Greenspoon Marder. That complexity adds friction for users who are trying to avoid realizing gains.
Still, the product is scaling. $1.9 billion in originations suggests real demand, not just speculative interest. Coinbase CEO Brian Armstrong said the next goal is $100 billion in onchain borrow originations. That's aggressive, but if institutional adoption accelerates and altcoin holders start treating their positions as productive capital rather than speculative bets, the infrastructure is in place to support it.
