Coinbase has added fixed-rate, bitcoin-backed loans to its lending business, letting eligible US customers borrow USDC against their bitcoin with the interest rate and repayment date locked in at the start of the loan.
The new product runs on Morpho Midnight, a decentralized, non-custodial lending protocol for fixed-rate and fixed-term loans that launched in July, and settles on Base, Coinbase’s Ethereum layer 2 network. It sits alongside the exchange’s existing variable-rate lending, which has grown to more than $1.4 billion in active loans backed by nearly $3 billion in collateral.
How the fixed-rate loans work
When a customer borrows against bitcoin on Coinbase, the pledged asset is converted into cbBTC, the exchange’s ERC-20 token backed one-for-one by bitcoin held in custody, and moved into a Morpho smart contract on Base. The customer receives USDC without selling their bitcoin exposure.
Unlike the variable-rate service, where interest changes with market conditions and loans stay open indefinitely within collateral limits, each Midnight loan sets an interest rate and a maturity date when the transaction begins. Loans currently mature either at the end of the current month or the following month, with end of month defined as the final Friday of that calendar month, according to a Coinbase spokesperson.
Lenders submit offers through an onchain order book, and borrowers pick terms from the available rates and maturities. The protocol uses an intent-based, peer-to-peer design rather than placing every borrower into a pool with an automatically adjusting rate. Lender capital can sit in variable-rate markets until a fixed-rate offer is accepted, at which point the liquidity moves into the matched loan. Idle capital therefore keeps earning until the moment it is needed.
If a borrower fails to repay USDC before maturity, lenders can claim against the cbBTC collateral securing the loan. That makes the repayment date a hard deadline rather than a suggestion, which is the main trade-off against the variable product. Variable loans can stay open as long as the position stays within its required collateral range, while fixed loans force a decision by a known date.
Why fixed rates matter now
The move takes onchain borrowing beyond the predominantly variable-rate model, giving users certainty over the cost and duration of their borrowing, Coinbase said in Tuesday’s announcement. That certainty is familiar to anyone who has taken a mortgage or a car loan, and its absence has been one of the gaps between onchain credit and traditional credit markets.
The bitcoin-backed credit market is currently sized at roughly $16 billion, according to the Bitcoin Digital Credit Report compiled by Apyx and BitcoinTreasuries.net. A survey of users in the US, UK and Australia conducted between February and March found 88% of respondents said they would consider a crypto-backed loan or credit product, a figure that suggests the addressable audience is far larger than current balances imply. Borrowing against crypto rather than selling it also avoids a taxable event in most jurisdictions, which is a large part of the product’s appeal.
Morpho’s token rose about 3.5% following the news, which also included Circle integrating bitcoin-backed USDC borrowing through Morpho. The protocol has become the default lending engine behind Coinbase’s credit products on Base, and the exchange’s Developer Platform introduced a Borrow API on September 22 that routes third-party app lending directly into Morpho markets on Base. Any app that opts into the Borrow product effectively ships with Morpho as its credit infrastructure.
“Coinbase Borrow gives our customers access to liquidity without having to sell their assets, and fixed-rate borrowing gives them even greater choice over how they manage that credit,” said Jacob Frantz, Coinbase’s yield and investments product lead.
The broader credit picture
Coinbase first brought the Morpho-powered model to most US states in 2025, with New York excluded from the initial rollout. The fixed-rate addition marks the second stage of that integration, and it arrives as several large players push into the same territory. Arch Lending, a US lender, began accepting tokenized gold alongside bitcoin and ether as collateral this month, offering loans starting at $250,000 with custody through Anchorage Digital. Traditional brokers have started offering crypto-backed credit in regulated wrappers as well.
The convergence of centralized exchanges and DeFi protocols is the notable part. Coinbase manages the customer interface and compliance, Morpho supplies the lending protocol, and Base processes the transactions. The customer sees a loan product. Underneath, the mechanics are entirely onchain, auditable and non-custodial in the sense that the smart contract, not the exchange’s balance sheet, holds the collateral. The distinction matters after the lender failures of the last cycle, when customer assets deposited with centralized lenders were rehypothecated and lost.
That structure also changes how risk is priced. Variable-rate crypto loans reset quickly when volatility spikes, which can force collateral top-ups at the worst moments. Fixed-rate loans shift that risk to lenders, who price it into the offered rate. Whether lenders on Base will supply enough fixed-term capital at competitive rates to make the product attractive at scale is the open question, and the first weeks of order-book activity will show the answer.
What to watch
The near-term signals are straightforward. Watch how much fixed-rate volume accumulates against the $1.4 billion variable book, and whether the offered rates on the Midnight order book stay close to variable levels or carry a meaningful premium for certainty. Watch whether Coinbase extends the product beyond end-of-month maturities, since longer terms are where fixed-rate markets get genuinely useful for planning. A three-month or twelve-month fixed loan would put onchain credit in the same category as conventional bank products.
The announcement also landed during a strong week for the exchange’s stock and the broader market. Coinbase shares closed near $199 on Tuesday, and the Nasdaq hit a second straight record close as oil slipped below $100. Crypto credit products are reaching customers in a risk-on window, which is when adoption decisions get made. The same launch in a drawdown would look very different, with thin lender interest and wide spreads.
For now, the sequencing is clear. Coinbase built variable-rate volume first, proved demand with $1.4 billion in balances, and is now adding the term structure on top. That is how traditional credit markets developed, from floating rates to fixed, and the onchain version is following the same path at compressed speed.