Coinbase Unlocks $1 Million in Liquidity Through cbETH Collateral Borrowing

Coinbase has rolled out a new lending solution that empowers eligible U.S. customers (excluding New York residents) to unlock up to $1 million in USDC liquidity by using cbETH—its tokenized version of staked ether—as collateral. This move eliminates the traditional choice between accessing cash and maintaining staking positions, allowing users to tap into funds while preserving their ether holdings and passive income streams.

The borrowing capacity reaches $1 million per account, with loans structured to enable repayment at any time without mandatory schedules or maturity dates. Borrowers can convert their USDC directly into dollars within Coinbase, streamlining the cash conversion process.

How the cbETH Collateral Framework Functions

At its core, the cbETH borrowing model operates through overcollateralization—borrowers must post more collateral value than the amount borrowed. This excess-backed approach protects the lending protocol while offering users flexibility around repayment terms. Users borrow against their cbETH holdings, which represent their staked ether positions on Coinbase.

The mechanics are straightforward: deposit cbETH, specify a USDC loan amount up to $1 million, and access the funds. Interest rates fluctuate based on market conditions rather than being locked at origination, meaning rates adjust dynamically as lending demand shifts across the protocol.

Morpho Protocol: The Engine Behind cbETH Lending

The lending infrastructure runs on Morpho, a specialized on-chain protocol engineered for overcollateralized borrowing. Morpho utilizes smart contracts to automate collateral management, interest rate calculations, and settlement, removing intermediaries from the lending process.

The protocol’s architecture enables seamless integration with staking tokens like cbETH, allowing these yield-bearing assets to serve dual purposes: passive income generation through staking rewards and collateral backing for large loans.

Managing Collateral Volatility: The 86% LTV Boundary

The primary risk in cbETH-backed borrowing centers on collateral volatility. Coinbase mandates that borrowers maintain a loan-to-value ratio below 86%, meaning the borrowed amount cannot exceed 86% of the cbETH collateral’s market value. Breaching this threshold triggers automatic liquidation of positions to settle outstanding loans.

Given ether’s price sensitivity—currently trading near $2.94K with 24-hour fluctuations—the LTV boundary could activate rapidly during market downturns. Sharp 5-10% drops in ETH value can compress available borrowing capacity, potentially forcing liquidations if users don’t maintain buffer room.

Why Staked-Asset Borrowing Is Reshaping Capital Strategies

The cbETH lending product addresses a fundamental tension in modern cryptocurrency portfolios: choosing between yield and liquidity. As ether staking transitions from speculative short-term yield farming into a long-term holding strategy, investors increasingly seek ways to capture staking rewards without sacrificing access to capital for expenses, portfolio rebalancing, or market opportunities.

By enabling $1 million borrowing tiers against cbETH, Coinbase extends the utility of staked ether beyond passive income. Users retain exposure to ETH price movements, continue earning staking rewards, and access substantial liquidity when needed—without forcing asset sales in volatile markets.

The competitive landscape for staked-asset lending has intensified as both centralized and decentralized platforms recognize demand for capital-efficient products. Tokenized staking derivatives like cbETH have grown steadily, particularly among investors seeking to avoid the opportunity cost of locked capital. Coinbase’s $1 million borrowing feature positions the exchange as a leading facilitator of this emerging financial primitive.