Coinbase is launching a new way for users to earn yields on their USDC holdings, marking the exchange's first large-scale integration of decentralized finance (DeFi) at a time when stablecoin adoption is accelerating.
The company announced on Thursday that it is directly integrating the Morpho lending protocol into the Coinbase app, with the protocol's treasury curated by DeFi consulting firm Steakhouse Financial. This move will allow users to lend USDC without needing to navigate third-party DeFi platforms or wallets.
Coinbase has already been offering up to 4.5% annual percentage yield rewards for holding USDC on its platform. However, according to Coinbase's data, with the new DeFi lending option, users can access on-chain markets and potentially earn yields of up to 10.8% as of Wednesday.
"Coinbase has only integrated one lending protocol (Morpho) in this product," a company spokesperson told Cointelegraph. "We advise users to understand the lending risks, which are outlined in the Coinbase app experience."
According to DefiLlama, Morpho ranks among the largest decentralized lending protocols in cryptocurrency, with a total value locked (TVL) exceeding $8.3 billion. The protocol's TVL in USD has surged significantly this year, reflecting growing demand for on-chain lending.
The integration of Morpho with Coinbase comes as more Americans express interest in using DeFi platforms in a more favorable regulatory environment. A recent survey conducted by the DeFi Education Fund among 1,321 American adults found that 40% would be willing to use such protocols if pending crypto legislation were enacted into law.
According to Binance Research, DeFi lending has grown by 72% year-to-date among institutional circles.
DeFi lending yields differ from simply earning passive interest on stablecoin holdings—this distinction has become increasingly contentious since the passage of the U.S. GENIUS Act, which explicitly prohibits yield-bearing stablecoins.
In August, the Bank Policy Institute (BPI), a lobbying group backed by major U.S. banks, urged regulators to close what it described as loopholes that could allow exchanges or affiliated companies to offer yields through third-party partners.
"Bank deposits are an important source of funding for bank lending, and money market funds are securities that invest and subsequently provide yields. Payment stablecoins serve different purposes, as they neither fund loans nor are regulated as securities," BPI stated in a release.
This backlash comes as stablecoin adoption accelerates, with circulating supply recently surpassing $300 billion, according to CoinMarketCap.
Meanwhile, Coinbase has rejected claims that dollar-pegged stablecoins threaten traditional banking. "Stablecoins do not threaten lending—they provide a competitive alternative to the $187 billion in swipe fees that banks earn each year," the exchange wrote in a blog post on Tuesday.
Related: DeFi Education Fund (DEF) poll shows: 40% of Americans say they would use DeFi if legally protected
Original article: “Coinbase Integrates Morpho Lending Protocol, Offering Up to 10.8% DeFi Yield on USDC”
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