Spark Taps Into Stablecoin Fragmentation

Spark wants to move liquidity between USDT, USDC, and PYUSD as stablecoins become more fragmented. Sky's DeFi protocol is targeting institutions and Uniswap v4.

Key Takeaways

• The stablecoin market is becoming more fragmented as issuers and consortia launch their own dollar tokens and networks.
• Spark wants to move liquidity across those stablecoins and has shifted about $150 million into Uniswap v4 pools.
• Spark is moving away from a consumer app and toward backend infrastructure, with a bigger focus on institutional lending and liquidity services.

The stablecoin market is getting increasingly fragmented, and Spark is trying to build a business around that shift. As fintechs, exchanges, and banking groups launch their own dollar tokens, the onchain capital allocator wants to sit in the middle and route liquidity between those networks.

The Market Is Getting Messier

Sam MacPherson, CEO of Phoenix Labs, says the stablecoin market is likely to split even further from here. PayPal has PYUSD, Circle has USDC, and Tether has USDT, while Robinhood has joined the Global Dollar consortium and is building its own chain. At the same time, groups like OpenUSD, which includes Stripe and Coinbase, are trying to keep users, reserves, and transactions inside their own ecosystems.

There are also hundreds of other stablecoins now in circulation, including Ethena's USDe, World Liberty Financial's USD1, and Sky's USDS. The result is a market where liquidity is spread across more tokens and more networks. For traders and protocols, that makes efficient swaps and settlement even more important.

Spark Is Betting on Liquidity

Spark is the affiliated lending and liquidity arm of Sky, the DeFi ecosystem formerly known as MakerDAO and the issuer of USDS. Built by Phoenix Labs and supported through Sky's governance and capital, the project is using its FX layer on Uniswap to help institutions move between stablecoins by concentrating liquidity in yield-bearing pools.

So far, the protocol has moved about $150 million (€131 million) into Uniswap v4 pools pairing USDS with USDT and PYUSD. MacPherson said that represented about 30% of stablecoin-to-stablecoin swap volume on Uniswap during the first 30 days, while the system processed roughly $1.5 billion (€1.3 billion) over that same period. The setup relies on a Uniswap v4 hook called DualPool, which keeps yield in Spark's vaults when liquidity is not needed and only moves it into the pool in a single block when a swap takes place.

Spark has also signed direct infrastructure deals with issuers. Last year, PayPal worked with Spark to improve PYUSD liquidity as it competed with USDT and USDC. That fits a broader pattern in which issuers are not just launching tokens, but also trying to control the distribution and settlement rails around them, like Circle and other major stablecoin players.

Why This Matters

The trend points to a broader market where stablecoins are starting to look more like traditional financial infrastructure, with specialized issuers, settlement rails, and custodians. That could be especially relevant for European crypto readers as the sector becomes more regulated. In the US, the GENIUS Act is on the way, and in Europe, MiCA is already in force, even though definitions and rules still differ from one financial center to another.

From App to Backend

Spark has now changed course, moving from a consumer app to backend infrastructure. MacPherson said it was too difficult to compete head-on with Coinbase, PayPal, and Robinhood, and that pausing the app was ultimately the right decision. Instead, Spark is now focused on providing yield and liquidity to the apps people already use.

The same strategy is meant to work in the institutional market. Spark's annual revenue has dropped from about $80 million (€69.7 million) during the bull market to around $20 million (€17.4 million) today, but its Bitcoin-backed OTC loans through Anchorage currently total about $260 million (€226 million) outstanding, with around $400 million (€348 million) in originations and a goal of $1 billion (€0.9 billion) by the end of the year. MacPherson did say that market conditions have slightly softened demand.

He said onboarding remains the biggest hurdle. Bitcoin miners are still a key target because they need to cover operating costs whether the market is rising or falling. Spark Prime, the hybrid prime brokerage that combines centralized and onchain financial services, has about $20 million (€17.4 million) in outstanding loans and is still intentionally in beta. The protocol is also pursuing credit ratings from S&P and Moody's, along with crypto-native ratings, to give institutional risk teams more data to work with.