Decentralized automation network Gelato announced a partnership with the lending protocol Morpho to enable exchanges, wallets, custodians, and fintech platforms to integrate fully non-custodial crypto-backed lending services within their applications.
This integration introduces a blockchain-abstracted user experience, allowing users to access borrowing functions seamlessly as part of the native interface of any participating product. By leveraging Morpho’s decentralized lending infrastructure and Gelato’s Smart Wallet SDK, users are able to secure stablecoin loans—such as USDC—against their cryptocurrency holdings, without the need for browser extensions, seed phrases, or gas fees.
The process allows for instant wallet creation through social or email login, cryptocurrency collateral deposits, immediate USDC borrowing, and flexible repayment. The entire lending operation is non-custodial and requires no user-initiated transaction signing, credit evaluation, or network fees. Lending logic is executed directly on-chain through smart contracts and is embedded in a fully composable format within the host application.
Today, in collaboration with @MorphoLabs, we're introducing Embedded Crypto-Backed Loans.
A new way for wallets, exchanges, and fintech applications to offer instant, non-custodial, and web2-like stablecoin loans directly in their products.
Available now on @arbitrum,… pic.twitter.com/EfWnDif5i3
— Gelato (@gelatonetwork) June 25, 2025
At the foundation of this solution are two interoperable components designed to support seamless and decentralized lending integration. The first is the Morpho Protocol, a publicly accessible and audited infrastructure that operates entirely on-chain, managing all aspects of lending—such as loan conditions, interest calculations, and collateral requirements—through decentralized governance rather than platform-level control.
The second component is the Gelato Smart Wallet SDK, a flexible development framework that enables wallets to adopt compatibility with EIP-7702 and ERC-4337 smart account standards. This toolkit eliminates the need for users to directly interact with on-chain mechanics by supporting one-click onboarding, the use of ERC-20 tokens for gas payments, and a fully gasless user experience across more than 50 supported blockchains. The combined use of these systems allows crypto-backed lending features to be integrated within a matter of days, without the need for custom-built lending protocols or wallet infrastructure.
Embedded Crypto-Backed Loans: Enabling Crypto-Backed Lending Integration For Digital Platforms
The Embedded Crypto-Backed Loans solution enables each phase of the borrowing process—including the creation of a smart wallet, the deposit of collateral, the issuance of USDC, and eventual repayment—to be carried out entirely onchain and seamlessly integrated into third-party platforms. This collaboration is intended to assist exchanges, custodians, wallets, brokers, and fintech applications in rapidly deploying lending functionality, reducing the typical development timeline from several months to a matter of days. It facilitates the delivery of secure, composable, and gas-abstracted lending services without requiring the implementation of custodial systems or the development of custom backend infrastructure.
These features form part of a broader initiative to enhance the Gelato Smart Wallet SDK’s security and account recovery tools, with upcoming additions such as passkey integration, multi-signer two-factor authentication, and modular recovery mechanisms. These enhancements are currently under development and are anticipated for release later in the year. The offering currently allows users to borrow USDC using cryptocurrency as collateral through a gasless interface, supports embedded wallet onboarding, and utilizes EIP-7702 compatible smart accounts. It is now available in beta with operational support on networks such as Polygon, Arbitrum, Optimism, Base, and Scroll, with Katana integration expected in the near future.
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