Coinbase Unlocks $100,000 Lending Power for XRP, DOGE, ADA, and LTC Holders – BitRss – Crypto World News

TLDR:

• The lending product has surpassed $1.9 billion in total loans since the initial Bitcoin launch.

• Altcoin borrowers face a stricter LTV cap of 49%, with liquidation reaching 62.5% due to price volatility.

• Packaging proprietary assets such as XRP for use on Base could constitute a taxable event under current US tax rules.

Coinbase onchain lending has expanded to include four new cryptocurrencies as eligible collateral. Holders of XRP, Dogecoin (DOGE), Cardano (ADA) and Litecoin (LTC) in the US can now borrow up to $100,000 in USDC.

The loans run via the Morpho lending protocol on Base, Coinbase’s Ethereum layer-2 network. Users post their crypto holdings as collateral and receive USDC without selling their assets. New York residents remain excluded from the service at this time.

Coinbase Expands Collateral Options Beyond Bitcoin and Ether

Coinbase originally launched its onchain lending product with Bitcoin support before adding Ether. This early offering allowed BTC ($66,913.00 · Live) holders to borrow up to $5 million and ETH ($1,968.44 · Live) holders to borrow up to $1 million in USDC. Since launch, the product has originated more than $1.9 billion in total loans.

The four newly added assets each have a lower borrowing cap of $100,000. According to data from CoinGecko, their combined market capitalization at the time of the announcement was approximately $117 billion.

That figure is less than half of Ethereum’s total market value, although all four coins maintain a consistent retail following.

Jacob Frantz, product leader at Coinbase, explained the thinking behind this move:

“No matter what you own, you should be able to leverage your crypto without having to sell it. Being able to borrow against more tokens means more opportunities to put your crypto to work for you.” — Jacob Frantz, Product Lead, Coinbase

Coinbase has indicated plans to expand the service internationally in the future.

Loan-to-Value ratios reflect Altcoin’s volatility

The Loan-to-Value ratio, or LTV, is central to how these loans work. It measures the size of the loan compared to the current market value of the collateral posted. As collateral prices fall or interest rates increase, LTV increases accordingly.

Bitcoin and Ether borrowers can access an LTV of up to 75%, with liquidation triggered at 86%. XRP, DOGE, ADA and LTC holders face stricter terms and borrow up to 49% LTV, with liquidation set at 62.5%. The stricter limits reflect the higher price volatility these altcoins bring compared to Bitcoin and Ether.

There is no fixed repayment schedule associated with these loans. However, borrowers must keep their LTV below the liquidation threshold at all times.

Coinbase sends alerts as often as every 30 minutes if the credit ratio approaches the danger zone, providing an extra layer of risk management.

Tax considerations and platform restrictions apply

Cryptocurrency-backed loans are often seen as a way to avoid capital gains taxes. Since no sale occurs, the tax event is deferred. That said, liquidations can trigger taxable events, according to law firm Greenspoon Marder LLP.

There is also a packaging issue to consider. Assets like XRP are packaged on Base, Coinbase’s Ethereum-compatible network, before use.

Under current US tax rules, converting a native asset to the packaged version counts as a taxable event. Coinbase has acknowledged this and noted that it does not provide tax advice.

There is one additional limitation on loan proceeds. Borrowers cannot use the USDC received to trade on the Coinbase exchange.

This steers users toward practical applications, such as covering expenses or making purchases, rather than leveraged speculation.

Interest rates in the Morpho markets fluctuate based on supply and demand within each credit pool. The interest rates are therefore not fixed at the time the loan is borrowed.

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