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Spark aims to establish a secure connection between on-chain capital and traditional finance.
Spark is providing access to its $9 billion stablecoin liquidity pool for hedge funds and additional institutions to connect on-chain capital with off-chain credit markets.
(MyriamsFotos/Pixabay, modified by CoinDesk)
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Key Points:
- Spark has launched Spark Prime and Spark Institutional Lending to cater to hedge funds and other institutional cryptocurrency borrowers.
- The offerings facilitate access to over $9 billion in on-chain stablecoin liquidity while maintaining custody and risk management off-chain.
- This initiative aims at the significantly larger $33 billion off-chain crypto lending sector, rather than focusing solely on DeFi.
EMB: Feb. 11, 06:00 UTC
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The decentralized finance (DeFi) platform Spark is advancing one of DeFi’s most substantial pools of stablecoin liquidity into institutional markets, introducing new lending infrastructure aimed at bridging on-chain capital with off-chain borrowers who have generally remained outside DeFi.
The protocol announced the launch of Spark Prime and Spark Institutional Lending during Consensus Hong Kong 2025 on Wednesday.
The new products extend over $9 billion in deployed stablecoin liquidity to hedge funds, trading firms, and fintechs that operate under conventional custody and compliance standards. Off-chain crypto lending is projected to be around $33 billion, according to Galaxy, indicating a consistent demand from institutions that remain wary of direct on-chain exposure.
“This will be OTC crypto lending through a qualified custodian,” Sam MacPherson, co-founder of Phoenix Labs, the primary contributor to Spark, informed CoinDesk in an interview. “This market is significantly larger than the DeFi lending market, and we’re capable of providing the same type of overcollateralized loans Maker has offered since its start, but with access to a far wider array of borrowers.”
Spark Prime presents a margin lending framework that enables borrowers to utilize collateral across centralized exchanges, DeFi platforms, and qualified custodians within a single risk structure. This configuration enhances capital efficiency for hedge funds engaging in strategies like perpetual futures trading, while giving lenders more direct exposure to funding rates.
The system is supported by prime broker Arkis’ margin and liquidation engine, which can automatically close positions across venues if portfolio risk limits are exceeded.
Spark Institutional Lending targets firms that prefer fully custodial involvement. Through partnerships with providers like Anchorage Digital, institutions can borrow against collateral held in regulated custody while accessing Spark-governed liquidity pools.
MacPherson noted that the design incorporates critical lessons learned from previous market failures. “The status quo is still unsecured lending to hedge funds, which can lead to significant issues,” he said. “By ensuring positions are overcollateralized and keeping collateral with an intermediary, you vastly enhance safety for lenders.”
Spark has already facilitated institutional-scale deployments, providing most of the liquidity for Coinbase’s bitcoin borrowing product in 2025 and allocating hundreds of millions of dollars to support PayPal’s PYUSD. The new offerings formalize this strategy into a broader institutional framework, positioning Spark as a link between on-chain stablecoin demand and off-chain capital markets.
