- Coinbase now allows U.S. customers (excluding New York) to use XRP, Cardano, Dogecoin, and Litecoin as collateral for loans up to $100,000 in USDC.
- The service is powered by the decentralized finance protocol Morpho and is one of the few ways to access liquidity from these assets without selling.
- Borrowing carries liquidation risk, and using these loans can trigger taxable events, according to legal analysis.
On Wednesday, Coinbase announced that U.S. customers can now use XRP, Cardano (ADA), Dogecoin (DOGE), and Litecoin (LTC) as collateral for loans. Users can borrow up to $100,000 in USDC via the decentralized finance protocol Morpho, though New York residents are excluded. The product provides a way to unlock liquidity without triggering a sale.
Consequently, these four newly supported assets hold a combined market capitalization of approximately $117 billion. A recent SEC filing also showed Coinbase held $17.2 billion worth of XRP on its platform at the end of December. This data points to significant potential demand for such loan products.
However, these collateralized loans carry real risks of liquidation. A Coinbase spokesperson explained that “the platform enforces an additional buffer when users take out a loan to reduce liquidation risk.” Borrowers receive frequent notifications as they approach their limits.
Meanwhile, there are important tax implications to consider. According to law firm Greenspoon Marder LLP, wrapping assets to use as on-chain collateral constitutes a taxable event in the U.S. Coinbase has stated it does not provide tax advice.
For assets like Dogecoin and Litecoin, which lack native staking, this loan product is particularly useful. It enables holders to generate liquidity from their holdings while maintaining exposure.
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