Earlier today, Coinbase announced The launch of “Bitcoin-Backed Loans” Its native blockchain, Base. However, there is a small problem. (Actually, two.)
The loans themselves are neither backed by Bitcoin nor even listed on the Bitcoin Blockchain.
In 2025 it’s still disappointing to see companies omitting important details in order to trick Bitcoin owners into giving up their coins.
The truth is that these loans will be collateralized with cbBTC – Coinbase’s Bitcoin-wrapped products designed to compete directly with wBTC & tBTC. This isn’t Bitcoin. In fact, it is the most centralized of all these. “wrapped” BTC tokens. This excellent blog post from the explains the assumptions behind wrapped BTC. Bitcoin Layers team: Analyzing tBTC Against wBTC and cbBTC.
The TL:DR version is here.
“The BTC backing the cbBTC token is held in reserve wallets managed by Coinbase, a US-based centralized custodial provider. Coinbase holds funds backing cbBTC in cold storage wallets across a number of geographically distributed locations and additionally has insurance on funds they custody.”
Coinbase also issues these loans via Morpho Labs. A DeFi platform that is often referred to as an alternative to AAVE. While Morpho is a well-established platform—and I don’t doubt its security—it has no connection to Bitcoin.
It is exciting to see actual Bitcoin-backed lending on the Bitcoin network. Many L2 teams are working hard to make this a reality, striving to minimize trust assumptions—or even eliminate the need for bridging altogether (bullish!).
Why would we ever need a native Bitcoin-backed loan? Take into consideration that many Bitcoiners face strict tax regulations today, which impose heavy liabilities on those who use their Bitcoins to finance significant purchases such as a home or car. By taking out a BTC-backed loan, individuals can avoid these tax events.
Most Bitcoiners believe that Bitcoin will continue to rise in price. Why would someone sell an asset that has such a promising future? Bitcoin-backed lending allows holders to maintain exposure to Bitcoin’s growth while gaining access to the liquidity required to meet daily financial requirements.
The options in today’s marketplace for Bitcoin-backed loan are very limited. If you want to rely solely on centralized firms (like Unchained, a reputable company), or go the alternative route of using a peer-to-peer lending platform. “DeFi” Unchained is a centralized alternative to protocols that are themselves centralized and in many cases riskier. However, at the moment there isn’t any truly Bitcoin-native solution—no option for Bitcoiners to maintain custody of their coins while accessing loans.
Lava.xyz and other companies are attempting to close this gap. Their market share is still a fraction of what existing DeFi platforms can handle. (Keep an eye on Lava—they’re poised to make waves in 2025!)
The following quote caught my attention:
“The integration of Bitcoin-backed loans on Coinbase is ‘TradFi in the front, DeFi in the back,'” Max Branzburg is Coinbase’s Vice President of Product. The Block.
Call it by its real name: central in front and central in the rear.
It’s time to leave these misleading offerings behind and bring true Bitcoin Finance (BTCfi) to users—not just marketing buzzwords and half-truths.
Let’s not say Bitcoin-backed loans, but rather multisig-backed loans backed by derivatives.
This is not a good article. Take. Opinions are solely those of the author and may not reflect BTC Inc.
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Source: bitcoinmagazine.com
