EMB: 11 February at 06:00 UTC
Decentralized finance (DeFi) protocol Spark is pushing one of DeFi’s deepest pools of stablecoin liquidity further into institutional markets, unveiling new lending infrastructure designed to connect on-chain capital with off-chain borrowers who have largely stayed out of DeFi.
The protocol introduced Spark Prime and Spark Institutional Lending in an announcement at Consensus Hong Kong 2025 on Wednesday.
The new offerings expand more than $9 billion in deployed stablecoin liquidity into products aimed at hedge funds, trading firms and fintechs operating under traditional custody and compliance requirements. Off-chain crypto lending is estimated at around $33 billion, according to Galaxy, reflecting continued demand from institutions that remain wary of direct onchain exposure.
“This will be OTC crypto loans through a qualified custodian,” Sam MacPherson, co-founder of Phoenix Labs, the core contributor to Spark, told CoinDesk in an interview. “This market is much larger than the DeFi lending market, and we are able to issue the same kind of oversecured loans that Maker has been doing since its inception, but with access to a much wider set of borrowers.”
Spark Prime introduces a margin lending model that allows borrowers to deploy collateral across centralized exchanges, DeFi venues and qualified custodians under a single risk framework. This structure improves capital efficiency for hedge funds pursuing strategies such as perpetual futures trading, while giving lenders more direct exposure to funding rates.
The system is powered by prime broker Arkis’ margin and liquidation engine, which can automatically liquidate positions across venues if portfolio risk thresholds are exceeded.
Spark Institutional Lending caters to businesses that prefer complete freedom of expression. Through agreements with providers such as Anchorage Digital, institutions can borrow against collateral in regulated custody while accessing Spark-managed liquidity pools.
MacPherson said the design reflects hard lessons from past market failures. “The status quo is still unsecured lending to hedge funds, which can go horribly wrong,” he said. “By keeping positions overcollateralized and holding collateral with an intermediary, you dramatically improve security for lenders.”
Spark has already supported institutional-scale deployments, providing most of the liquidity behind Coinbase’s bitcoin lending product in 2025 and allocating hundreds of millions of dollars to support PayPal’s PYUSD. The new offerings formalize this approach into a broader institutional framework and position Spark as a conduit between on-chain stablecoin demand and off-chain capital markets.
