The US exchange Coinbase partners with the lending protocol Morpho to launch USDC on-chain lending features through its L2 network Base, providing not only a high yield of up to 10.8% APY but also challenging traditional banks and regulatory frameworks, highlighting the impact and controversy of expanding stablecoin-based businesses within the global financial system.
Coinbase launches on-chain lending services, allowing depositors to enjoy 10.8% APY
Coinbase CEO Brian Armstrong announced today the collaboration with the lending protocol Morpho to launch USDC on-chain lending features, allowing users to earn a maximum annual yield of 10.8% directly on USDC stored in the Coinbase App.
The announcement states that Coinbase will establish smart contract wallets for users depositing USDC, and will automatically allocate funds to different lending pools to maximize returns:
Users will immediately start earning returns after depositing and can withdraw at any time, but the specific returns still depend on liquidity.
(Is issuing stablecoins really that profitable? Looking at the profit truth of late participants from Tether to Aave GHO.)
Unlike 'USDC rewards', it offers users on-chain exposure and returns.
This yield far exceeds the 4.1% of simply holding USDC as originally offered by Coinbase and the 4.5% 'Rewards' for Coinbase One members.
(Coinbase offers a 4.5% interest rate to capture the market, is a yield-generating stablecoin that targets bank deposits really risk-free?)
Coinbase emphasizes that the returns from the on-chain lending service are fundamentally different from USDC rewards:
USDC rewards do not involve lending out user assets; this is a user loyalty program provided independently by Coinbase, with the incentive funds coming directly from Coinbase's marketing budget.
In other words, the on-chain lending funds will allow users to actually experience and participate in DeFi protocols while maintaining the operational convenience of Coinbase, providing them with exposure and additional returns.
Currently, this feature will be trialed in select markets, with plans to expand to more regions in the coming weeks. This includes the United States (excluding New York), Hong Kong, the UAE, New Zealand, the Philippines, Taiwan, and South Korea. Coinbase stated that this move is part of its strategy to 'allow users to participate more directly in the on-chain economy.'
Stablecoin yield ban controversy: The gray area under the GENIUS Act.
However, Coinbase was previously criticized by the American Bankers Association (led by BPI) for its USDC reward mechanism, suggesting it was exploiting a loophole in the GENIUS Act by packaging a concept similar to interest income as a reward.
BPI pointed out: 'Stablecoins are not bank deposits or investment securities; issuers and distributors do not operate lending businesses, so they should not offer interest.'
Now Coinbase invests in the project Morpho through its own venture capital Coinbase Ventures, integrating on-chain and providing lending services that are essentially no different from banks, undoubtedly another regulatory gray area.
(The American banking industry demands to close the GENIUS loophole: stablecoin interest could spark a $6.6 trillion outflow of deposits.)
With the launch of Coinbase's new service, the lines between on-chain protocols and exchanges are becoming increasingly blurred, and how to strike a balance between innovation and regulation will become an important focus for future exchanges integrating crypto finance.
This article reports that Coinbase, in collaboration with Morpho, launched USDC on-chain lending services, offering an annualized return of 10.8%, first appearing in Chain News ABMedia.
