EMB: February 11, 06:00 UTC
Decentralized finance protocol (DeFi) Spark pushes one of DeFi’s deepest pools of stablecoin liquidity further into institutional markets, unveiling a new lending infrastructure designed to connect on-chain capital with off-chain borrowers who have largely remained out of DeFi.
The protocol introduced Spark Prime and Spark Institutional Lending in an announcement at Consensus Hong Kong 2025 on Wednesday.
The new offering extends more than $9 billion in deployed stablecoin liquidity to products targeted at hedge funds, trading firms and fintechs operating under traditional custody and compliance requirements. Off-chain crypto lending is valued at approximately $33 billion, according to Galaxy, reflecting continued demand from institutions that remain cautious about direct on-chain exposure.
“This will be OTC crypto lending through a qualified custodian,” Sam MacPherson, co-founder of Phoenix Labs, the top 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 type of overcollateralized loans that Maker has done since inception, but with access to a much broader pool 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 unwind positions across locations if portfolio risk thresholds are exceeded.
Spark Institutional Lending is aimed at companies that prefer full participation. Through agreements with providers like Anchorage Digital, institutions can borrow against collateral held in regulated custody while having access to Spark-managed liquidity pools.
MacPherson said the design reflects the hard lessons of past market failures. “The status quo is still unsecured lending to hedge funds, which can go terribly wrong,” he said. “By holding over-collateralized positions 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 offering formalizes that approach into a broader institutional framework, positioning Spark as a conduit between on-chain stablecoin demand and off-chain capital markets.