Coinbase Rolls Out Crypto-Backed Loans in the UK as FCA Shapes Rules

The US-based crypto exchange, Coinbase, has introduced crypto-backed USDC loans for users in the UK, which allows users to borrow USDC stablecoin against Bitcoin, Ether, and Coinbase Wrapped Staked Ether (cbETH) with up to 3.5 percent APY in USDC rewards automatically kicking in for Coinbase One members. The loans are issued through Morpho, which is a lending protocol on Base. As per the announcement, users can borrow up to $5 million (roughly Rs. 46.8 crore) in USDC with BTC-backed loans. Coinbase added that borrowing costs can change frequently, which is why interest rates are variable and are set by Morpho based on market conditions on Base. 

Coinbase Says Collateral Will Be Locked in Morpho Smart Contract

In the announcement, Coinbase mentioned that there is no fixed repayment schedule, but borrowers face liquidity risks if the loan-to-value ratio exceeds specific benchmarks. Crypto-backed loans in the UK are one of the early steps by Coinbase in their efforts to expand, as they had launched the same offer in the US in January 2025. Coinbase added that in the US, the total loan originations through Coinbase on Morpho are growing to over $2.17 billion (roughly Rs. 20,294 crore) USDC as of April 14, suggesting the initial interest in this service. 

Coinbase also put out a disclaimer saying that “Collateral will be locked in a Morpho smart contract until the loan is fully repaid. If the loan-to-value ratio of the loan exceeds the liquidation loan-to-value, your collateral will be liquidated to repay the loans, and the Morpho protocol will charge a liquidation penalty fee. USDC can be sent for zero fees on all supported networks except Ethereum. All stablecoins come with risks.” 

The expansion comes amidst ongoing regulatory developments in the UK, where the Financial Conduct Authority (FCA) has said it is seeking guidance for the country's future crypto rules from various crypto firms. The main objective is to have clarity over market participants, encourage effective competition, provide consumer protection, and have fair, transparent, orderly, and resilient markets. 

Coinbase has launched this product at a time when the exchange is exploring various ways to expand crypto-backed lending into traditional finance use cases. Going forward, the balance between innovation and regulation will play a key role in shaping the adoption of crypto lending services in regulated markets.