TLDR
- Coinbase partners with Morpho protocol to offer USDC lending with yields up to 10.8%
- Users can access DeFi lending directly through Coinbase app without external wallets
- Integration creates complete lending ecosystem connecting deposits to crypto-backed loans
- Morpho protocol manages over $8.3 billion in total value locked across DeFi markets
- Launch comes as stablecoin market surpasses $300 billion in total supply
Coinbase has launched a new USDC lending service that integrates directly with the Morpho DeFi protocol. The feature allows users to earn yields up to 10.8% on their stablecoin holdings without leaving the Coinbase platform.
The integration represents one of Coinbase’s largest moves into decentralized finance. Users previously earned up to 4.5% APY for holding USDC on the exchange.
The new lending option uses vaults managed by Steakhouse Financial through the Morpho protocol. Users can deposit USDC and earn interest from borrowers while maintaining the ability to withdraw funds anytime.
“We recommend that users understand the risks of lending, which are outlined in the Coinbase app experience,” a Coinbase spokesperson told reporters. The company currently integrates with only the Morpho protocol for this service.
Morpho ranks as one of the largest DeFi lending protocols with over $8.3 billion in total value locked. The protocol has seen steady growth throughout 2025 as institutional demand for onchain lending increases.
How the USDC Lending System Works
The new feature creates what Coinbase calls a complete onchain lending and borrowing ecosystem. When users deposit USDC, their funds are automatically lent to borrowers including customers using Coinbase’s existing crypto-backed loan services.
This creates a flywheel effect where the lending and borrowing products support each other. Borrowers pay interest that generates returns for USDC depositors.
Coinbase has already originated over $900 million in loans through its crypto-backed lending service. The company describes its approach as the “DeFi mullet” – familiar user interface powered by decentralized infrastructure.
The integration allows users to access DeFi lending markets without navigating external platforms or managing separate wallets. For Morpho, the partnership provides access to Coinbase’s large user base.
Growing Institutional Interest in DeFi Lending
Recent data shows DeFi lending has grown 72% year-to-date among institutional investors according to Binance Research. The growth reflects increasing acceptance of decentralized finance among professional traders.
A survey by the DeFi Education Fund found 40% of US adults would consider using DeFi platforms if pending cryptocurrency legislation passes. The survey included 1,321 American adults.
Regulatory Environment for Stablecoin Yields
The launch occurs as regulators debate stablecoin yield products. The US GENIUS Act explicitly prohibits yield-bearing stablecoins, creating questions about third-party lending integrations.
The Bank Policy Institute has urged regulators to examine potential loopholes that allow exchanges to offer yields through partner protocols. The group represents major US banks concerned about stablecoin competition.
Coinbase has defended stablecoins against claims they threaten traditional banking. The exchange argues stablecoins provide competition to bank fees rather than undermining lending.
Stablecoin adoption continues accelerating with total supply exceeding $300 billion across all protocols. The Morpho integration positions Coinbase to benefit from this growth trend while offering users enhanced earning opportunities on their USDC holdings.
