Coinbase Integrates Morpho Protocol for On-chain USDC Lending with 10.8% Yields

Coinbase has announced the launch of a new USDC lending service that allows users to earn competitive yields of up to 10.8% annually, marking a significant expansion of the exchange's DeFi offerings. The service is powered by an integration with Morpho, a decentralized lending protocol, and operates entirely on the Base blockchain network.

The new lending feature enables Coinbase users to lend their USDC holdings directly through the familiar Coinbase app interface, eliminating the complexity typically associated with DeFi protocols. When users deposit USDC, Coinbase automatically creates a smart contract wallet that connects to Morpho's lending markets through vaults curated by Steakhouse Financial. The integration represents Coinbase's continued push into onchain services, building on their existing crypto-backed loan offerings that also utilize Morpho's infrastructure.

Morpho operates as a permissionless decentralized lending platform that functions on two levels, offering tailored solutions for users to earn and borrow on their terms. The protocol creates isolated, customizable markets for overcollateralized crypto loans, enabling more efficient capital allocation compared to traditional pooled lending models. As an open network, Morpho connects lenders and borrowers to optimal opportunities worldwide while maintaining the security and transparency of decentralized finance.

Users can access their funds at any time when liquidity permits, maintaining the flexibility expected from traditional financial products while earning DeFi-level yields. The service complements Coinbase's existing USDC rewards program, which offers 4.1% APY for standard users and up to 4.5% for Coinbase One members, providing significantly higher potential returns for users willing to participate in DeFi lending markets.

Coinbase is implementing a phased rollout approach, gradually expanding access to users across the United States excluding New York State, Bermuda, and additional international markets over the coming weeks. This measured deployment strategy allows the company to monitor system performance and user adoption patterns before full-scale launch. 

With USDC maintaining a circulating supply exceeding $73.6 billion, the launch positions Coinbase to capture a larger share of the stablecoin yield market. The integration leverages Base's growing ecosystem while providing institutional-grade infrastructure through partnerships with established DeFi protocols. The service includes standard disclaimers noting that USDC lending products are not FDIC or SIPC insured and do not constitute traditional savings accounts, representing Coinbase's broader strategy to bridge traditional finance users with decentralized financial services through simplified, accessible interfaces. 

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