Coinbase has expanded its crypto-backed lending product in the U.S. to include XRP, ADA, DOGE and LTC, letting users borrow as much as $100,000 in Circle’s USDC without selling their holdings. The service is available across the country, with New York excluded.
The loans are not being handled directly on Coinbase’s balance sheet. Instead, users post crypto as collateral and the borrowing flow is routed through Morpho, a decentralized lending protocol, so the core loan mechanics take place on-chain. Coinbase has pitched the product as a way to unlock liquidity while keeping exposure to the underlying asset.
More retail-focused tokens enter the collateral pool
The product had previously centered on bitcoin and ether. With this expansion, some of the market’s more retail-heavy tokens are now eligible as collateral. ADA and ether already offer holders a way to earn yield through staking on their native networks, but XRP, DOGE and Litecoin do not come with built-in reward systems. For investors in those assets, borrowing against holdings is one of the few ways to access liquidity without closing the position.
The move also increases the potential collateral base on Coinbase’s platform. In an SEC filing, the exchange reported holding $17.2 billion in XRP as of Dec. 31, making it one of the larger assets in customer accounts.
Tax appeal remains, but liquidation risk is central
Crypto-backed loans have long been marketed as a tax-efficient strategy because borrowing against an asset does not trigger capital gains in the same way a sale does. That benefit comes with clear downside when prices swing hard. If the value of collateral drops too far compared with the loan balance, the position can be liquidated, allowing a third party to repay the debt and take the collateral at a discount.
Coinbase said it applies an extra buffer when users take out loans in order to reduce liquidation risk, and it sends notifications as positions approach the threshold. The company has also warned that collateral used in the product is wrapped, a process that allows tokens such as XRP to exist on Ethereum-compatible networks.