EMB: February 11, 06:00 UTC
Decentralized finance (DeFi) protocol Spark is taking one of DeFi’s deepest stablecoin liquidity pools further into the institutional market, launching a new lending infrastructure designed to connect on-chain capital with off-chain borrowers who largely don’t participate in DeFi.
The agreement introduced Spark Prime and Spark Institutional Loans in an announcement made at Consensus 2025 in Hong Kong on Wednesday.
The new products extend more than $9 billion of stablecoin liquidity into products targeting hedge funds, trading firms and fintech companies operating under traditional custody and compliance requirements. According to Galaxy, off-chain cryptocurrency lending is estimated to be around $33 billion, reflecting continued demand from institutions wary of direct on-chain risk.
“This will be over-the-counter cryptocurrency lending through qualified custodians,” Sam MacPherson, a core contributor to Spark and co-founder of Phoenix Labs, told CoinDesk. “This market is much larger than the DeFi lending market, and we are able to issue the same type of over-collateralized loans that Maker has done since its inception, but with access to a wider range 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 increases 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 clearing engine, which can automatically close positions if portfolio risk thresholds are breached.
Spark Institutional Lending is aimed at companies that prefer full custody participation. Through arrangements with providers such as Anchorage Digital, institutions can borrow against regulated custody collateral while accessing liquidity pools managed by Spark.
McPherson said the design reflected the hard lessons of past market failures. “The status quo remains one of providing unsecured loans to hedge funds, which can go terribly wrong,” he said. “Lenders’ security can be greatly improved by keeping positions overcollateralized and holding collateral through intermediaries.”
Spark already supports institutional-scale deployments, providing the majority of liquidity for Coinbase’s Bitcoin lending product in 2025 and allocating hundreds of millions of dollars to support PayPal’s PYUSD. The new product formalizes this approach into the broader institutional framework, positioning Spark as a conduit between on-chain stablecoin demand and off-chain capital markets.
