Coinbase is expanding its cryptocurrency-backed lending products in the U.S. to include XRP, Cardano’s ADA and expanding access to its service, which is a way for clients to release liquidity without selling their assets.
The product allows users to put cryptocurrency as collateral and borrow up to $100,000 of Circle’s USDC stablecoin. Loans are processed through the decentralized lending protocol Morpho, which means the lending mechanism is handled on-chain rather than through Coinbase’s own balance sheet.
The service is available throughout the United States except New York.
The move brings some of the largest retail volume coins in cryptocurrency into a product previously focused on Bitcoin and Ethereum. While Ethereum and Cardano holders can already earn by staking on their native networks, assets such as XRP, DOGE, and Litecoin do not offer built-in rewards mechanisms.
For these investors, borrowing against their holdings has become one of the few ways to obtain liquidity without exiting their positions.
Coinbase is also expanding the pool of potential collateral on its platform. The exchange reported that it held $17.2 billion worth of XRP as of December 31, according to an SEC filing, making the token one of the larger assets in customer accounts.
Cryptocurrency-backed loans have long been promoted as a tax-saving strategy because borrowing against an asset does not trigger capital gains like selling the asset.
But when markets move rapidly, this structure creates significant risks. If the value of the collateral drops too much relative to the loan, the position can be liquidated, meaning a third party can repay the debt and seize the collateral at a discount.
When users take out loans, Coinbase applies additional buffers to reduce liquidation risk and sends notifications when thresholds are approached. Still, the exchange also warned that the collateral used by the product is wrapped, a process that allows tokens like XRP to exist on Ethereum-compatible networks.
