Coinbase is significantly broadening its crypto-backed lending program in the United States by adding support for several high-profile digital assets, including XRP, Dogecoin, Cardano, and Litecoin. This expansion allows customers to unlock liquidity from their portfolios without triggering the capital gains taxes typically associated with selling. While Coinbase previously limited this service to Bitcoin and Ether, the inclusion of assets like XRP and Dogecoin provides these holders with a rare way to access cash from their positions, as these specific tokens do not offer native staking rewards or built-in yield mechanisms.
The technical structure of the product allows users to post their crypto as collateral to borrow up to $100,000 in Circle’s USDC stablecoin. These loans are routed through Morpho, a decentralized lending protocol, which means the borrowing mechanics are handled on-chain rather than through Coinbase’s own balance sheet. This service is now available across most of the United States, with the notable exception of New York. By opening up this pool, Coinbase is tapping into a massive amount of idle capital, having reported over $17.2 billion in XRP alone held in customer accounts at the end of last year.
While the program is marketed as a tax-efficient strategy for investors to maintain their market exposure, it carries inherent risks related to market volatility. Because the collateral is “wrapped” to function on Ethereum-compatible networks, a sharp drop in the market value of the tokens could lead to liquidation. If the value of the collateral falls too far relative to the loan balance, a third party can repay the debt and seize the underlying assets at a discount. To manage this, Coinbase applies a safety buffer and sends automated notifications to users as they approach these risky liquidation thresholds.
