Coinbase has launched a new feature letting users lend their USDC stablecoins onchain via the Morpho protocol, offering yields of up to 10.8% APR.
This lending is facilitated using smart contract wallets, with liquidity managed through onchain vaults curated by Steakhouse Financial.
Where & When It’s Available
- The feature is rolling out in the U.S. (excluding New York State), Bermuda, and several international jurisdictions.
- It’s delivered via Coinbase’s Base layer-2 network (MetaChoice / Ethereum L2) using the DeFi protocol Morpho.
How It Works: Key Mechanics
- Users deposit USDC into Coinbase, and those funds are routed via smart contract wallets into DeFi lending pools via Morpho.
- Steakhouse Financial manages the vaults, optimizing liquidity across markets while enabling withdrawals when liquidity is available.
- The yield is significantly higher than Coinbase’s existing “USDC Rewards” program, which offers ~4.1% APY (or ~4.5% for Coinbase One members).
Benefits & Risks
Benefits:
- Higher returns on stablecoin holdings compared to typical savings or “rewards” programs.
- Access to DeFi yields without needing to manage external DeFi wallets or directly interact with protocols—Coinbase’s UI abstracts much of that.
- Flexibility: users can withdraw their funds (subject to liquidity) without being locked in.
Risks/Considerations:
- Regulatory risk: jurisdictions are increasingly scrutinizing crypto lending and stablecoin yield offerings. Some areas (like New York) are excluded.
- Smart contract risk: DeFi protocols carry inherent risks (bugs, exploits). Even though Coinbase wraps the experience, underlying DeFi components have risk.
- Liquidity risk: withdrawal may be delayed or limited if liquidity in the vaults or lending pools is low.
- Yield volatility: The “up to 10.8%” is a maximum under current conditions; actual yields may fluctuate with market demand, DeFi interest rates, and protocol usage.
Why This Move Matters
- It signals Coinbase’s push to expand its DeFi footprint, bridging centralized exchange (CEX) ease of use with DeFi returns.
- It offers stablecoin holders a more attractive option compared to passive holding or low-yield reward programs.
- This could influence competitor exchanges to adopt similar DeFi-integrated yield products, especially as demand grows for stable income in crypto.
