Coinbase Unleashes $1M Loans Secured by Staked Ethereum
Coinbase just flipped the liquidity script. The exchange giant is now letting institutional clients borrow up to a million dollars—using their staked Ether as collateral.
Unlocking Frozen Capital
This isn't just another lending product. It’s a direct attack on the biggest pain point in proof-of-stake: locked-up value. Investors who stake ETH have traditionally had to choose between earning yield and accessing their capital. Coinbase's new offering smashes that trade-off, letting users tap into their staked holdings without selling or unstaking—a process that still takes days.
The Mechanics of Trust
The system relies on over-collateralization, a familiar concept in DeFi, but with a centralized custodian holding the keys. Clients stake their ETH through Coinbase, and the exchange extends a loan against that position. It’s a hybrid model—leveraging the trust of a regulated entity with the efficiency of crypto-native finance. The rates and loan-to-value ratios are tailored for big players, clearly aiming for the wallets of funds, VCs, and high-net-worth individuals.
A Strategic Power Play
This move does more than just create a new revenue stream. It aggressively ties major capital deeper into Coinbase's ecosystem. Once you're borrowing against your staked ETH, you're far less likely to move those assets elsewhere. It’s a classic walled-garden strategy, dressed up as a liquidity solution—because why just hold customer assets when you can also lend against them and collect interest twice?
The finance world loves nothing more than using the same dollar three times over. Coinbase seems happy to oblige, proving that even in the decentralized future, the oldest rule still applies: the real money is in lending.
Coinbase debuts cbETH collateralized lending for staking services
According to the Nasdaq-listed exchange’s advertisement of the product, borrowers can request up to $1 million in USDC, with loan limits determined by the amount of eligible crypto posted as collateral and subject to loan-to-value requirements.
Funds will be credited to the user’s Coinbase account immediately upon approval, while the pledged collateral is transferred onchain to a third-party protocol. The loans are powered by Morpho, a decentralized lending protocol that facilitates overcollateralized borrowing through smart contracts.
Coinbase also disclosed that borrowers must maintain a loan-to-value ratio below 86% to avoid automatic liquidation and penalties. That threshold could come under pressure during extremely volatile market conditions for Ether, which is undoubtedly higher than for fiat currencies.
The crypto exchange would effectively extend the utility of its staked ether beyond passive yield generation by taking cbETH as collateral. Users can continue earning staking rewards while accessing liquidity for large purchases, portfolio adjustments, or one-time expenses, and other crypto lending services that exchanges issue solely to institutions.
Coinbase launched crypto staking services in New York late last year after receiving approval from the state’s Department of Financial Services. The platform’s staking is now available in 46 US states, excluding California, New Jersey, Maryland, and Wisconsin, which have limited or blocked retail crypto staking programs.
“Thanks to Governor Hochul’s leadership in embracing progress and providing clarity, this milestone marks a meaningful step forward in ensuring residents of the Empire State have access to the same economic opportunities already open to most other Americans,” the company said in a statement.
Coinbase-led regulatory friction threatens the US Clarity bill’s passing
As reported by Cryptopolitan last week, Coinbase CEO Brian Armstrong withdrew his support for a draft version of the Clarity Act, a crypto market structure bill. The industry is now divided, with players like Andreessen Horowitz backing the bill even as Coinbase objects to some of its provisions.
Robinhood CEO Vlad Tenev revealed that staking is among the most requested features from his company’s users, and urged the four states to consider opening their borders to the DeFi strategy. Tenev wrote on X last week that the US needs legislation that protects consumers while enabling innovation to MOVE forward.
“We support Congress’s efforts to pass the market structure bill. There is still work to be done, but we see a path and are here to help,” he said in a post on X.
The Senate Banking Committee delayed a vote on the bill after Armstrong announced Coinbase’s withdrawal of support in a post on X. Stablecoins account for nearly 20% of the company’s revenue, totaling $355 million in the third quarter of 2025, according to its shareholder letter.
Blockchain advocate RON Hammond, a policy observer who is part of the Washington discussions, believes there is a 40% chance the market structure bill will be passed. “The question is, how far can they bend this bill before it breaks?” he asked.
In an interview on FOX Business, Armstrong said the crypto exchange’s main issue with the Clarity Act is competitive fairness. “It just felt deeply unfair to me that one industry bank WOULD come in and get to do regulatory capture to ban their competition. They should have to compete on a level playing field, and I genuinely believe that.”
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