Coinbase signaled on Wednesday that its crypto-backed lending product is expanding in the U.S., unveiling support for XRP, Dogecoin, Cardano, and Litecoin.
XRP, Dogecoin, Cardano, and Litecoin had a combined market cap of $117 billion on Wednesday, CoinGecko data shows. Although that was less than half of Ethereum’s total value, the assets have been popular among retail investors in recent years.
Coinbase has positioned the product as a way for customers to grow their wealth in ways that they otherwise couldn’t. That pitch has centered around DeFi’s ability to augment Coinbase’s business, but it also speaks to what those digital assets are capable of natively.
Ethereum and Cardano can be staked natively on their respective networks, allowing users to earn rewards by validating transactions.
That isn’t the case for XRP, Dogecoin, and Litecoin—making crypto-backed lending one of the few ways for holders to generate liquidity without selling their positions.
Liquidations occur on Morpho when the value of a user’s collateral falls too much relative to the amount they borrowed. Once a certain threshold is reached, a user’s loan is deemed unhealthy, allowing third parties to pay it back and gain the associated collateral at a discount.
What’s more, assets posted as collateral through Coinbase’s product are wrapped. Although that process allows assets like XRP to exist on networks like Ethereum, swapping a crypto for its wrapped version is treated as a taxable event in the U.S.
Coinbase noted on X that crypto-backed loans face liquidation risk, and it does not provide tax advice.
They added that the exchange is exploring additional ways for users to protect their loans. Around that time, $170 million worth of crypto-backed loans had been liquidated over a seven-day period, Decrypt previously reported.
