When fintech companies emerged, they succeeded in reimagining user experiences and distribution channels but remained constrained by traditional financial infrastructure. This created a fundamental limitation: innovative customer-facing solutions built on legacy backend systems.
Blockchain technology and decentralized finance (DeFi) now offer an alternative. Today’s financial innovators can leverage DeFi infrastructure to build products that are more scalable, efficient, and transparent than before.
Introducing the “DeFi Mullet“: intuitive fintech interfaces at the front with decentralized financial infrastructure at the back. It’s not just a new approach to building financial products—it’s a definitive step toward delivering on the promise of a more open, efficient, and resilient financial system.
Enter: Crypto-Backed Loans on Coinbase, powered by Morpho
In January 2025, Coinbase launched crypto-backed loans powered by Morpho, marking it one of the largest-scale DeFi integration for Coinbase to date.
The product gives millions of people in the U.S. (ex. New York) instant access to loans without all the complexities associated with using DeFi directly. The Coinbase app abstracts the blockchain itself, wallets, gas fees, asset wrapping, and more so that customers can seamlessly access USDC loans against their BTC collateral on the protocol, all within the app integration.
In the background, the loans are powered by Morpho, providing instant access to hundreds of millions in USDC liquidity while offering Coinbase customers the most competitive rates and loan-to-value ratios available across existing CeFi or DeFi lending solutions.
Let’s take a closer look at how this example of the DeFi Mullet—fintech in the front, DeFi in the back—paves the way for other exchanges and fintechs to launch more transparent, efficient, and cheaper financial products with significantly lower development overhead.
The Numbers So Far
The product is still in its infancy, but the initial metrics indicate a strong demand for onchain financial services like it.
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Total Collateral Provided: $287M+
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Total Active Loans: $135M+
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Number of Users: 4,846
Date Source here
The DeFi Mullet: Coinbase in the Front, Morpho in the Back
Coinbase In The Front: A Seamless User Experience
By building a crypto-backed loan integration on Morpho, Coinbase can focus its time and resources on crafting an intuitive and simple user experience that completely abstracts blockchain interactions for its millions of customers.
Specifically, Coinbase crypto-backed loans
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Use Coinbase Smart Wallet as the gateway to onchain transactions
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Leverage Paymaster to allow gas fees to be paid in cbBTC
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Authenticate users with passkeys, eliminating the need to sign cryptographic transactions
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Transfer funds seamlessly between Coinbase accounts and onchain wallets using Magic Spend
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Operate on Base, a fast and low-cost Ethereum L2 network
Morpho In The Back: Open Financial Infrastructure
Morpho enables Coinbase to significantly reduce operational overhead while making the product more accessible, transparent, and efficient.
The integration taps into the cbBTC/USDC market on the Base instance of Morpho.
The Morpho smart contracts store the cbBTC collateral, match borrowing demand with USDC liquidity, and handle interest, position accounting, and liquidation mechanisms.
By design, Morpho is noncustodial, allowing users to maintain complete control over their positions and the flexibility to repay at any time.
That means Coinbase users can repay their USDC loans and withdraw their cbBTC collaterals at any moment.
Why Build On Morpho's Infrastructure
Morpho enables fintechs to bring their product to market faster and with significantly less development overhead.
Here are the key advantages of building on an open infrastructure.
Immutability
Morpho is fully immutable and governance-minimized.
This design offers two key benefits for integrators:
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the protocol will remain unchanged forever
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the Lindy Effect strengthens over time, as Morpho Labs’ Head of Integration and co-founder Merlin Egalite explained in this opinion piece.
This unchanging nature is crucial for integrations. Unlike upgradable DeFi smart contracts that pose dependency risks for integrations, Morpho’s immutable design eliminates these concerns—integrators can trust that the protocol will function exactly as it does today, indefinitely.
Additionally, Morpho operates independently of its governance system, making governance attacks like the one that affected Compound impossible.
Open-Source Infrastructure
Instead of building lending infrastructure from scratch, integrators can leverage Morpho’s secure, transparent, and efficient onchain system to launch products faster.
The Morpho Stack is fully permissionless and includes smart contracts, APIs, and SDKs to support custom lending and borrowing use cases.
In addition to existing user and liquidity network effects, Morpho offers built-in financial primitives. Morpho Markets handle position and interest rate accounting at the contract level, eliminating the need for custom development.
Morpho Markets also feature a native liquidation mechanism and an established ecosystem of liquidators. When liquidation is needed, these actors can step in automatically—without requiring Coinbase’s direct involvement—to prevent bad debt.
Global Rails, Deep Liquidity
Another advantage of building on Morpho is the instant access to $6B in existing liquidity, eliminating the “cold start” problem that many lending platforms face. Integrators can rely on Morpho’s existing liquidity to bootstrap any of their lending use cases.
Morpho’s flexible infrastructure empowers businesses to build tailored lending or borrowing products while operating on the same open foundation, unlocking maximum efficiency through shared liquidity and network effects.
As more institutions and DeFi applications integrate Morpho, the stronger the networks effects become.
Security
Morpho follows a strict Security Framework that spans from ideation through post-deployment. Security isn’t merely an afterthought—it’s woven into Morpho’s design philosophy from the start.
During development, Morpho underwent rigorous testing, including Formal Verifications that met the same exact standards used in aerospace and transportation software.
A dedicated team oversees this comprehensive process.
Leading security firms like Spearbit and Open Zeppelin have thoroughly audited Morpho, establishing it as one of the most secure lending protocols in the space.
After deployment, Morpho Labs maintains continuous protocol monitoring and offers a $2.5M bug bounty—larger than Apple’s bounty program—to incentivize white hat hackers to identify potential vulnerabilities.
Transparency
The promise of onchain loans is straightforward yet powerful: users can earn passive income on idle assets or borrow funds without selling their crypto. This core value proposition led to widespread adoption of the first CeFi (centralized finance) lending platforms.
Between 2021 and 2022, platforms like Celsius and BlockFi leveraged this opportunity, becoming some of crypto’s most popular platforms with billions in lending volume.
However, these CeFi platforms functioned as black boxes. Users couldn’t see how their assets were being used, whether collateral was being rehypothecated, or the true source of yields. When market conditions deteriorated, these hidden weaknesses triggered collapses that impacted the entire industry.
The lesson became evident: while crypto loans are in high demand, they must be built on transparent foundations.
In the case of Coinbase’s Morpho integration, collaterals, loans, interest-rates, repayments, and more on Morpho can be monitored and verified directly onchain.
Launch Scalable, Efficient, and Transparent Financial Products Faster
Building on Morpho allows financial applications to be much more open, efficient and resilient with much lower operational and technological overhead for the integrators.
If you’re interested in building on Morpho’s open infrastructure, get in touch via growth@morpho.xyz.