Coinbase Disrupts Traditional Banking with Morpho-Powered USDC Lending—Earn Up to 10.8% APY

Coinbase just dropped a bombshell on traditional finance—launching USDC lending through Morpho that delivers double-digit yields while banks offer pennies.

Yield Revolution in Digital Dollars

Forget savings accounts paying 0.01%. Coinbase's new lending platform connects users directly with institutional borrowers through Morpho's peer-to-peer protocol—bypassing traditional banking middlemen entirely. The 10.8% APY isn't some promotional gimmick—it's real yield powered by actual market demand for stablecoin liquidity.

Banking's Kodak Moment

While legacy institutions still debate whether to offer digital asset services, Coinbase is actively eating their lunch. This move positions USDC not just as a stablecoin—but as a yield-bearing asset that competes directly with traditional savings products. The timing couldn't be more perfect—with rising interest rates making traditional finance's sluggishness even more apparent.

Wall Street's watching—and sweating—as decentralized finance protocols continue delivering what banks promised but never delivered: actual returns for depositors. Maybe if traditional banks spent less time on compliance theater and more on innovation, they wouldn't be getting outmaneuvered by a company that didn't exist 15 years ago.

TLDR

• Coinbase integrates Morpho protocol, offering up to 10.8% yields on USDC through decentralized finance.
• USDC lending on Coinbase surpasses 4.1% APY, with a new DeFi option yielding up to 10.8%.
• Morpho protocol’s lending pools help Coinbase users optimize returns on USDC deposits.
• Coinbase’s DeFi integration expands globally, starting in select U.S. states and international markets.

Coinbase has integrated the Morpho protocol into its platform, offering USDC holders the opportunity to earn yields of up to 10.8%. This MOVE signals a key step in bringing decentralized finance (DeFi) to a mainstream audience, providing users with more attractive alternatives to traditional banking interest rates. The new lending feature will allow users to deposit USDC and participate in DeFi lending markets through Coinbase, unlocking higher yields than previously offered.

New USDC Lending Feature on Coinbase Platform

Coinbase’s latest lending feature directly integrates Morpho, a decentralized lending protocol, into its platform. By doing so, Coinbase expands its offerings to include decentralized finance, allowing users to earn up to 10.8% yields on their USDC holdings. 

This yield significantly surpasses the 4.1% APY available through Coinbase’s USDC Rewards program, with an even higher rate of 4.5% available to Coinbase One members.

Morpho’s integration enables Coinbase users to access DeFi lending pools, where smart contract wallets route funds across various lending protocols to optimize returns. The approach is designed to be simple and familiar to users, maintaining the ease of traditional finance while leveraging the potential of decentralized markets.

How DeFi Lending Works for Coinbase Users

The new lending feature is based on Steakhouse Financial’s on-chain vaults, which are hosted on Base, Coinbase ethereum layer-2 solution. Users can deposit USDC into these vaults and start earning yield almost immediately, with flexibility in withdrawals. However, liquidity conditions may affect the ability to withdraw funds at any given moment.

The integration of Morpho and the Base network ensures that users can participate in decentralized finance without needing to navigate complex DeFi protocols directly. The system automatically moves funds to the most efficient lending pools, helping users earn competitive returns while avoiding the need for constant monitoring.

Coinbase move into DeFi lending represents a significant shift in its platform, offering a streamlined experience that blends traditional finance with decentralized finance functionality. While the new feature provides higher yields compared to traditional options, users may be exposed to different levels of risk typically associated with DeFi lending protocols.

Global Availability and Institutional Demand for DeFi Lending

The rollout of the new lending feature begins with select users across the United States (excluding New York), as well as international markets, including Hong Kong, the UAE, New Zealand, the Philippines, Taiwan, and South Korea. Coinbase has plans to expand access to this feature in the coming weeks, broadening its global reach.

Morpho ranks among the largest decentralized lending protocols, with a total value locked (TVL) of over $8.3 billion. The protocol has seen substantial growth in 2024, reflecting increasing institutional interest in DeFi. Coinbase’s partnership with Morpho is part of the growing trend of institutional DeFi adoption, with research showing a 72% increase in institutional DeFi lending year-to-date.

This move is in line with Coinbase’s broader strategy to integrate decentralized protocols into its platform, connecting users to the growing on-chain economy. The exchange has also previously partnered with Morpho for Bitcoin-backed loans, allowing customers to borrow up to $1 million in USDC against Bitcoin holdings.