Spark Looks to Build Building a Safe Bridge Between Onchain Capital and TradFi
•February 11, 2026
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Companies Mentioned
Why It Matters
By delivering institutional‑grade, over‑collateralized crypto loans, Spark unlocks a larger pool of off‑chain capital for DeFi, accelerating mainstream adoption and reducing counterparty risk.
Key Takeaways
- •Spark launches Prime and Institutional Lending products.
- •$9B stablecoin liquidity extended to institutional borrowers.
- •Over‑collateralized loans reduce risk for hedge funds.
- •Arkis engine automates margin liquidation across venues.
- •Anchorage partnership enables custodial borrowing for institutions.
Pulse Analysis
The DeFi sector has long grappled with the challenge of integrating institutional capital while preserving the security guarantees of blockchain. Spark’s latest suite—Spark Prime and Institutional Lending—addresses this gap by channeling over $9 billion of stablecoin liquidity into products that meet traditional custody, compliance and risk‑management standards. By leveraging a single risk framework that spans centralized exchanges, DeFi protocols and qualified custodians, Spark offers a seamless bridge for hedge funds and fintech firms seeking exposure to crypto assets without sacrificing regulatory oversight.
At the core of Spark’s offering is an over‑collateralized loan model reminiscent of Maker’s early designs, but enhanced for institutional use. The partnership with Arkis supplies a sophisticated margin and liquidation engine capable of automatically unwinding positions across multiple venues when risk thresholds are breached, thereby protecting lenders from sudden market swings. Meanwhile, collaborations with custodians such as Anchorage allow borrowers to pledge assets held in regulated vaults, ensuring that the collateral remains secure and auditable. This dual approach—combining automated risk controls with custodial safety—creates a compelling value proposition for firms wary of unsecured crypto lending.
The broader market implications are significant. Off‑chain crypto lending, estimated at $33 billion, has remained fragmented and risk‑laden; Spark’s infrastructure could consolidate this space, attracting more conservative institutions and driving deeper liquidity into DeFi ecosystems. Competitors will likely need to match Spark’s blend of over‑collateralization, custodial integration, and automated risk management to stay relevant. As institutional participation grows, the line between on‑chain capital and traditional finance will blur, positioning platforms like Spark as pivotal conduits in the next wave of crypto finance.
Spark looks to build building a safe bridge between onchain capital and TradFi
Spark looks to build a safe bridge between on‑chain capital and TradFi
Feb 11, 2026, 6:00 a.m. (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 that have largely stayed outside DeFi.
The protocol introduced Spark Prime and Spark Institutional Lending in an announcement at Consensus Hong Kong 2025 on Wednesday.
The new offerings extend more than $9 billion in deployed stablecoin liquidity into products aimed at hedge funds, trading firms and fintechs that operate under traditional custody and compliance requirements. Off‑chain crypto lending is estimated at about $33 billion, according to Galaxy, reflecting sustained 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 core contributor to Spark, told CoinDesk in an interview. “This market is much bigger than the DeFi lending market, and we’re able to issue the same kind of over‑collateralized loans Maker has done since its inception, but with access to a much broader 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. That 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 venues if portfolio risk thresholds are breached.
Spark Institutional Lending is aimed at firms that prefer fully custodial participation. Through arrangements with providers such as Anchorage Digital, institutions can borrow against collateral held in regulated custody while accessing Spark‑governed 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 over‑collateralized and holding collateral with an intermediary, you dramatically improve safety for lenders.”
Spark has already supported institutional‑scale deployments, supplying most of the liquidity behind Coinbase’s bitcoin borrowing product in 2025 and allocating hundreds of millions of dollars to support PayPal’s PYUSD. The new offerings formalize that approach into a broader institutional framework, positioning Spark as a conduit between on‑chain stablecoin demand and off‑chain capital markets.
AI Disclaimer: Parts of this article were generated with the assistance of AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards. For more information, see CoinDesk's full AI Policy.
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