TLDR
- Coinbase now offers USDC holders yields up to 10.8% through Morpho DeFi integration
- The integration brings DeFi lending directly into Coinbase’s app, eliminating need for third-party platforms
- Morpho ranks among largest DeFi lending protocols with over $8.3 billion TVL
- Comes amid growing stablecoin adoption with supply exceeding $300 billion
- Bank Policy Institute has questioned yield-bearing stablecoins under the GENIUS Act
Coinbase has launched a new feature that allows users to earn higher yields on their USDC holdings by integrating with the Morpho lending protocol. This marks one of the exchange’s first major collaborations with decentralized finance (DeFi) at a time when stablecoin usage continues to grow rapidly.
The company announced on Thursday that it is bringing Morpho’s lending capabilities directly into the Coinbase app, with vaults curated by DeFi advisory firm Steakhouse Financial. This integration enables users to lend their USDC through DeFi markets without having to navigate external platforms or wallets.
Morpho now powers USDC lending on @coinbase.
Millions of users can earn more on USDC with sustainable yield backed by global borrowing demand — all within the Coinbase App.
Curated by @SteakhouseFi. Powered by Morpho. pic.twitter.com/eGAWanSYoZ
— Morpho 🦋 (@MorphoLabs) September 18, 2025
While Coinbase already offers rewards of up to 4.5% APY for holding USDC on its platform, the new DeFi lending option potentially increases yields to as high as 10.8%, based on rates as of Wednesday.
A Coinbase spokesperson clarified that the company has integrated with only one lending protocol for this offering. “We recommend that users understand the risks of lending, which are outlined in the Coinbase app experience,” the spokesperson told Cointelegraph.
Morpho has established itself as one of the largest decentralized lending protocols in the crypto space, with more than $8.3 billion in total value locked (TVL) according to DefiLlama. The protocol’s dollar-denominated TVL has seen a steep increase this year, reflecting the growing demand for onchain lending services.
Rising Interest in DeFi
The timing of this integration coincides with increasing interest in DeFi platforms among American users. A recent survey of 1,321 US adults conducted for the DeFi Education Fund found that 40% would be open to using such protocols if pending crypto legislation were enacted into law.
In institutional circles, DeFi lending has seen even more dramatic growth, jumping 72% year-to-date according to data from Binance Research. This suggests broader adoption beyond retail users.
The move comes as stablecoin adoption accelerates across the crypto ecosystem. The total circulating supply of stablecoins recently surpassed $300 billion, according to CoinMarketCap, highlighting their growing importance in digital finance.
DeFi lending for yield differs fundamentally from simply earning passive interest on stablecoin holdings. This distinction has become increasingly important since the passage of the US GENIUS Act, which explicitly prohibits yield-bearing stablecoins.
Regulatory Questions
The Bank Policy Institute (BPI), a lobbying group supported by major US banks, has raised concerns about what it describes as a potential loophole in regulations. In August, the BPI urged regulators to address arrangements that might allow exchanges or their affiliates to provide yield through third-party partners.
“Bank deposits are an important source of funding for banks to make loans, and money market funds are securities that make investments and subsequently offer yield. Payment stablecoins serve a different purpose, as they neither fund loans nor are regulated as securities,” the BPI stated.
Coinbase has pushed back against claims that dollar-pegged stablecoins undermine traditional banking. “Stablecoins don’t threaten lending — they offer a competitive alternative to banks’ $187 billion annual swipe-fee windfall,” the exchange wrote in a Tuesday blog post.
The integration represents a convergence of centralized and decentralized finance, giving Coinbase users easier access to DeFi yields without requiring technical knowledge of external protocols or self-custody wallets.
For USDC holders on Coinbase, the new offering provides an option to potentially more than double their yield compared to the platform’s standard rewards program. However, as with all DeFi protocols, these higher returns come with additional risks that users should understand before participation.
The Morpho integration is now available through the Coinbase app, allowing users to start lending their USDC holdings directly from their accounts.
