Coinbase has introduced a new feature allowing users to earn higher yields on USD Coin (USDC) by lending through decentralized finance (DeFi). The exchange announced that the program offers annualized returns of up to 10.8%.
This initiative represents Coinbase’s latest effort in DeFi during a period when stablecoins are gaining popularity among retail and institutional investors.
Coinbase Doubles USDC Payouts With New Lending Option
Coinbase’s lending option operates on Morpho, a DeFi protocol, which channels customer deposits into specialized vaults managed by advisory firm Steakhouse Financial. This process utilizes Base, Coinbase’s proprietary Layer 2 blockchain. According to DeFiLlama, Morpho now secures over $8 billion in assets, highlighting its significance as one of the largest DeFi lenders.
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This marks a transition from fixed 4.1%–4.5% USDC Rewards to Morpho-powered onchain lending with yields up to 10.8%. Users can begin earning yield immediately and withdraw their funds at any time, subject to available liquidity. By integrating lending tools within its app, the exchange aims to connect mainstream finance users with complex onchain protocols.
Distinct from the loyalty-style USDC Rewards program—financed directly from Coinbase’s resources and not linked to customer asset lending—the new feature links deposits to DeFi protocols.
The onchain service has commenced with a limited group of users, with Coinbase planning a wider rollout in the coming weeks across the U.S. (excluding New York), Bermuda, and multiple Asian and Middle Eastern markets including Hong Kong, the UAE, New Zealand, the Philippines, Taiwan, and South Korea.
Market Buzz as Coinbase Expands Into DeFi Lending
Analysts suggest that Coinbase’s entrance into onchain lending could boost adoption by retail users who have been hesitant to explore decentralized applications. By offering DeFi yield strategies within a regulated and familiar environment, the company may help legitimize the process of lending stablecoins for income.
According to Binance Research, DeFi lending has surged 72% year-to-date in institutional markets, indicating a heightened interest in blockchain-based credit systems. With U.S. lawmakers deliberating on digital asset legislation, observers believe Coinbase is strategically positioning itself for a future where stablecoin products become increasingly significant in mainstream portfolios.
If successful, this rollout could transform USDC into not just a transactional stablecoin but also a default yield-generating asset for millions of Coinbase users. Such a transformation could further cement the token’s status as one of the most widely utilized digital dollars in the global crypto landscape.
Nonetheless, analysts warn that risks persist, including vulnerabilities in smart contracts, liquidity shortages in volatile markets, and possible counterparty failures within DeFi protocols.
In this context, Coinbase shares closed at $343 on Thursday, reflecting a 7% increase from the previous day. This price denotes a 111% rise compared to a year ago but remains around 18% below the mid-July peak of $419.
