From CeFi to DeFi: How Coinbase Just Reinvented Stablecoin Yields in 2025

• What’s New in Coinbase’s App?
• Why This Isn’t Your Average Stablecoin Yield
• Who Benefits? Retail, Pros, and Stablecoin Adoption
• Risks and Fine Print
• The Bigger Picture: DeFi’s "Mullet Strategy"
• FAQs

Coinbase has taken a giant leap forward in 2025 by integrating on-chain lending directly into its app, allowing users to earn up to 10.8% APY on USDC without leaving the platform. This move bridges the gap between centralized finance (CeFi) and decentralized finance (DeFi), offering a seamless experience while maintaining custodial security. Curated by Steakhouse Financial and powered by Morpho, this innovation could reshape how retail and institutional investors interact with stablecoins. But with great yield comes great responsibility—variable rates, liquidity risks, and regulatory nuances remain key considerations.

What’s New in Coinbase’s App?

Coinbase’s latest update is a game-changer for passive income seekers. Instead of the traditional 4.5% APY on idle USDC, users can now deploy their stablecoins into Morpho-powered lending vaults with just a few taps. Here’s the kicker: the app automatically creates a smart contract wallet and routes funds to curated DeFi markets, all while keeping the interface familiar. No MetaMask gymnastics, no bridge headaches—just real-time yield tracking and withdrawals when liquidity allows. It’s like having your CAKE (CeFi simplicity) and eating it too (DeFi-level returns).

Why This Isn’t Your Average Stablecoin Yield

Don’t mistake this for a glorified savings account. These yields come from actual on-chain borrowing demand, collateralized loans, and protocol-level risk parameters—not Coinbase’s balance sheet. As the BTCC team notes, "This is DeFi in a custodial wrapper, blurring lines but not without distinctions." Regulatory scrutiny looms large; the SEC might raise eyebrows at the "10.8%" splash page, but Coinbase preemptively emphasizes yield variability and educational prompts. For context, Morpho’s docs reveal how their peer-to-pool model mitigates impermanent loss risks—a nuance lost in most marketing hype.

Who Benefits? Retail, Pros, and Stablecoin Adoption

Retail users win big with frictionless DeFi access. Imagine your aunt earning double-digit yields without memorizing seed phrases—that’s the power here. Institutional players, meanwhile, get a compliant on-ramp to deploy USDC at scale. Merchants, Web3 platforms, and market makers can now optimize idle stablecoins without operational overhead. But the real winner? USDC itself. By proving utility beyond payments, it cements its role as crypto’s premier productive asset. As TradingView data shows, USDC’s circulating supply surged 40% year-to-date, partly fueled by such innovations.

Risks and Fine Print

That tantalizing 10.8% isn’t guaranteed. Like all DeFi yields, it dances to market demand’s tune. Key red flags: liquidity crunches during volatility, vault withdrawal limits, and oracle failures. Jurisdictional hurdles also apply—some regions face access restrictions, and tax treatments vary wildly. "This isn’t risk-free yield farming," warns a BTCC analyst. "It’s DeFi with training wheels." Case in point: when Aave’s ETH vaults hit 12% APY last March, rates corrected to 5% within weeks. History rhymes, even in 2025.

The Bigger Picture: DeFi’s "Mullet Strategy"

Coinbase’s playbook—"trusted frontend, decentralized backend"—mirrors crypto’s broader trajectory. PayPal’s 2024 stablecoin push and Hyperliquid’s $320B DeFi explosion set the stage. Now, with 83M users potentially onboarding to Morpho’s pools, liquidity fragmentation could ease, stabilizing rates across chains. The endgame? A seamless loop where USDC moves between payments, lending, and trading without friction. Just don’t call it financial advice—DYOR still rules.

FAQs

How does Coinbase’s new yield feature work?

It routes your USDC through smart contracts to Morpho’s lending markets, earning interest from borrowers who post collateral. Coinbase handles the tech stack while you see a simplified interface.

Is the 10.8% APY guaranteed?

Nope—it fluctuates with borrowing demand. During September 2025’s market surge, rates spiked but could drop if liquidity outpaces demand.

What are the risks?

Smart contract bugs, collateral liquidations, and regulatory changes top the list. Always assess vault parameters before depositing.

Can I withdraw anytime?

Yes, but subject to vault liquidity. High withdrawal volumes may trigger temporary delays.