Spark bridges the gap between DeFi and TradFi, with $9 billion in stablecoin liquidity directly connected to institutional capital

February 11 News, decentralized finance protocol Spark announced the launch of a new institutional lending infrastructure aimed at building a secure channel between on-chain capital and traditional financial systems. Through the two main products, Spark Prime and Spark Institutional Lending, Spark is bringing the most robust stablecoin liquidity in the DeFi space into the institutional lending market, which has long relied on off-chain methods.

Spark stated that these two services have expanded over $9 billion in deployed stablecoin liquidity to hedge funds, trading firms, and fintech institutions that need to meet custody and compliance requirements. According to Galaxy data, the off-chain crypto lending market is approximately $33 billion, indicating that many institutions remain cautious about directly engaging with on-chain assets, but the demand for crypto-related financing remains strong.

Phoenix Labs co-founder Sam MacPherson noted that the new system essentially involves over-the-counter crypto lending through qualified custodians, using an over-collateralization structure to reduce systemic risk. He emphasized that unsecured loans in the past caused serious consequences, but the new design significantly improves loan safety through risk controls and custodial segregation.

Spark Prime introduces a unified collateral framework, allowing borrowers to flexibly deploy collateral across centralized platforms, DeFi protocols, and qualified custodians, while managing liquidations under a single risk engine. The system is supported technically by prime broker Arkis, which can automatically trigger cross-platform liquidations when the combined risk exceeds thresholds, providing higher capital efficiency for high-frequency strategies like hedge funds.

Spark Institutional Lending targets institutions preferring a fully custodial model. By partnering with service providers like Anchorage Digital, borrowers can use custodial collateral within a regulated environment and access on-chain liquidity pools managed by Spark.

Previously, Spark has provided core liquidity support for several institutional products, including hundreds of millions of dollars for the 2025 Bitcoin lending project and stablecoin ecosystems. This upgrade signifies that Spark is gradually becoming a key infrastructure connecting stablecoin demand with global capital markets. (CoinDesk)