PayPal Partners with Spark Protocol to Scale PYUSD Liquidity to $1 Billion Through DeFi Lending

PayPal has partnered with decentralized finance platform Spark Protocol to dramatically expand liquidity for its PYUSD stablecoin, targeting growth from the current $100 million to $1 billion in deposits over the coming weeks. The collaboration launched in September 2025 through Spark's lending marketplace, SparkLend.

PYUSD, issued by regulated custodian Paxos and pegged to the U.S. dollar, was recently integrated into SparkLend's platform, which operates an $8 billion stablecoin reserve pool. The integration allows users to supply and borrow PYUSD while providing predictable liquidity depth at set borrowing costs.

The partnership represents a shift from traditional liquidity programs that rely on expensive market-maker incentives. Instead, Spark's approach offers sustainable stablecoin adoption through its existing DeFi infrastructure. Sam MacPherson, CEO of Phoenix Labs and a Spark contributor, described the initiative as "a blueprint for how fintech firms can use DeFi to bootstrap adoption of new stablecoins."

PayPal's PYUSD has experienced significant growth, with its market capitalization surging to $1.3 billion by September 2025, driven by institutional adoption and multi-chain expansion strategies. The stablecoin's integration with SparkLend comes as the broader stablecoin market shows renewed momentum, with global supply climbing nearly $30 billion in three months to $263 billion and daily transaction volumes exceeding $100 billion.

David Weber, Head of PYUSD Ecosystem at PayPal, emphasized the strategic importance of the partnership, stating that "platforms like Spark are crucial to advancing PYUSD as a cornerstone for DeFi with deep liquidity" as total DeFi value approaches $150 billion.

Spark Protocol has previously demonstrated its capacity for large-scale institutional lending, having deployed $630 million in on-chain Bitcoin-backed loans to major exchange Coinbase. The platform's proven track record in managing substantial liquidity positions positions it as a key infrastructure provider for PayPal's DeFi expansion strategy.

The collaboration occurs alongside PayPal's broader efforts to expand PYUSD's utility through cross-chain integration initiatives, including partnerships with other blockchain platforms to enhance global market access. These moves reflect PayPal's commitment to establishing PYUSD as a dominant force in the rapidly evolving stablecoin ecosystem. 

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