Coinbase Introduces USDC Lending Program, Bridging CeFi and DeFi

Coinbase Expands Decentralized Finance Offerings

Coinbase Global, Inc. (COIN) has announced the launch of a new USDC lending product, facilitating access to on-chain decentralized finance (DeFi) yields for its users. This development, powered by partnerships with Morpho and Steakhouse Financial, allows users to earn an annual percentage yield (APY) of up to 10.8% on their USDC deposits.

The Lending Mechanism in Detail

The newly introduced feature integrates Coinbase's centralized platform with the underlying DeFi infrastructure. USDC deposits are routed into optimized lending pools managed by Morpho, a leading DeFi protocol, which boasted over $8.3 billion in total value locked (TVL) as of 2025. Steakhouse Financial contributes to liquidity management and rate optimization. The entire system leverages Base Layer 2 technology, a solution designed to reduce transaction costs and enhance scalability. This streamlined approach allows Coinbase users to participate in the on-chain lending market directly through their familiar app interface, eliminating the need to navigate complex DeFi platforms or manage self-custody wallets. The product also underpins Coinbase's existing crypto-backed loan service, which has already originated over $900 million in loans.

Strategic Integration and Market Implications

This initiative by Coinbase represents a significant step in bridging traditional finance (CeFi) and decentralized finance (DeFi), a strategy often referred to as a "DeFi mullet"—a user-friendly front end powered by robust DeFi protocols in the background. The 10.8% APY offered by Coinbase provides a compelling incentive for both retail and institutional investors, dramatically exceeding its previous USDC Rewards program of 4.5% APY and far surpassing conventional U.S. savings rates, which average around 0.5%. This high yield aims to attract substantial capital, transforming USDC from "idle cash" into an active, yield-generating asset.

For institutional investors, the service offers a low-friction entry point into DeFi's yield-generating ecosystems, bypassing the operational complexities typically associated with direct engagement with multiple DeFi protocols. The custodial infrastructure provided by Coinbase also mitigates common DeFi risks such as smart contract vulnerabilities and liquidity crunches, enhancing institutional confidence. The stablecoin USDC currently accounts for 26% of the total lending TVL, with its circulation exceeding $73 billion.

Broader Market Context and Future Outlook

The DeFi lending market has experienced considerable growth, with TVL peaking at $55 billion in December 2024. Projections indicate that the broader crypto lending market is set to expand from $8.5 billion in 2024 to an estimated $45 billion by 2030. Coinbase's move positions it as a crucial on-ramp for institutions seeking exposure to these burgeoning markets without compromising on compliance or user experience.

Brian Armstrong, Coinbase's CEO, articulated the vision behind this integration:

The future of finance is on-chain, but accessed through trusted interfaces.

While this expansion offers considerable opportunities, the regulatory landscape remains a key factor. The exclusion of certain jurisdictions, such as New York, from the initial rollout underscores the fragmented and evolving nature of DeFi regulation in the U.S. However, Coinbase's plans for potential expansion into the EU suggest confidence in the mainstream adoption of DeFi. Looking ahead, the success of this USDC lending product could pave the way for similar offerings across other stablecoins, further challenging the dominance of traditional banking systems. Specific revenue and earnings impacts directly attributable to this new product were not available in the briefing materials.