Coinbase has introduced fixed-rate bitcoin-backed loans, allowing U.S. users outside New York to borrow USDC against their bitcoin while locking in both the interest rate and repayment date before funds are disbursed. The product launched Tuesday through Morpho Midnight on Base, enabling borrowers to access liquidity without selling their bitcoin or facing variable borrowing costs.
Previously, Coinbase offered bitcoin-backed loans, but they came with floating interest rates and no fixed maturity date. Borrowers could repay whenever they chose as long as their positions remained healthy. The new Morpho Midnight product changes this by establishing both a borrowing rate and maturity date before the loan begins.
How the Loans Work
The structure involves multiple steps. Bitcoin held on Coinbase is converted into cbBTC, the company's tokenized representation, before moving onchain to a Morpho smart contract on Base. That cbBTC serves as collateral, and borrowers receive USDC in their Coinbase account.
Coinbase functions as the storefront while Morpho supplies the lending infrastructure. Unlike traditional banks that quote rates directly, Morpho Midnight uses an onchain market where borrowers and lenders trade standardized debt and credit units. One debt unit represents an obligation of 1 USDC at maturity, while one credit unit represents a claim to 1 USDC. The price of these units determines the borrowing rate. Same-maturity units are interchangeable after matching, helping avoid thin markets.
Scale of Existing Bitcoin Lending
The underlying lending infrastructure already handles substantial volumes. Morpho's data showed approximately $3.60 billion in Coinbase-linked collateral, $1.56 billion in outstanding borrowing, and $3.07 billion in total loan originations across roughly 53,000 borrowers. Coinbase launched bitcoin-backed USDC loans through Morpho Blue on January 16, 2025, while Morpho launched Midnight on July 21, 2026.
Risks Remain
Fixed interest rates do not protect borrowers from bitcoin price volatility. If bitcoin declines significantly and the loan-to-value ratio crosses the market's liquidation threshold, collateral can still be liquidated. Additionally, Midnight introduces a maturity date requirement that Coinbase's open-ended Blue loans do not have, meaning repayment becomes due on a specified date.
Traditional Borrowing Comes to Crypto
The development represents a shift in how crypto lending functions. Onchain borrowing has historically required users to accept floating rates and smart-contract governance. Midnight retains the underlying smart-contract infrastructure while offering more familiar borrowing terms. Borrowers know the rate upfront, understand when repayment is due, and can access funds without liquidating bitcoin. The underlying mechanics remain decentralized across multiple protocols, but the user experience resembles traditional banking.
