PayPal USD

USDS

Genius

Spark

PayPal has partnered with decentralized finance (DeFi) protocol Spark to expand liquidity for its US dollar stablecoin, PayPal USD (<a href="/paypal-pyusd-price-index" rel="noopener noreferrer nofollow">PYUSD</a>).&nbsp;
PayPal's stablecoin has attracted more than $135 million in deposits since its August <a href="https://forum.sky.money/t/august-7-2025-proposed-changes-to-spark-for-upcoming-spell/26896" rel="noopener noreferrer nofollow" target="_blank">listing</a> on SparkLend, a lending market focused on stablecoins, according to a Thursday statement.
SparkLend was launched in <a href="https://cointelegraph.com/news/makerdao-launches-spark-protocol-a-new-defi-lending-solution-for-dai-users" rel="noopener noreferrer nofollow" target="https://cointelegraph.com/news/makerdao-launches-spark-protocol-a-new-defi-lending-solution-for-dai-users">2023 out of the MakerDAO ecosystem</a> and later integrated into <a href="https://cointelegraph.com/news/maker-rebrands-sky-launches-usds-sky-token" rel="noopener noreferrer nofollow" target="https://cointelegraph.com/news/maker-rebrands-sky-launches-usds-sky-token">Maker’s successor entity, Sky</a>. It runs the Spark Liquidity Layer, which is backed by more than $8 billion in stablecoin reserves, according to the protocol.
<figure><img alt="Spark integrates PayPal USD into its stablecoin lending markets" src="https://s3.cointelegraph.com/uploads/2025-09/01998100-6b84-731d-9b6e-3afcb5d1697e" title="">
 <figcaption style="text-align: center;">Staked stablecoins on Sparklend protocol. Source: <a href="https://defillama.com/protocol/tvl/sparklend" rel="noopener noreferrer nofollow" target="_blank">DeFiLlama</a> 
 </figcaption>
</figure>
 Sam MacPherson, co-founder and CEO of Phoenix Labs, a core contributor to Spark, told Cointelegraph that PayPal chose Spark because it “is the only at-scale DeFi protocol that can actively deploy capital into other protocols.” He added:
<blockquote>
 “DeFi will be the rails for all finance in the future, so focusing on that makes a lot of sense as there is massive growth potential.”
</blockquote>
Spark is a non-custodial lending <a href="https://messari.io/report/understanding-spark-a-comprehensive-overview" rel="noopener noreferrer nofollow" target="_blank">protocol</a> where users deposit stablecoins into Spark Savings and receive non-rebasing yield tokens. According to Messari, these tokens maintain a fixed balance but grow in value over time, with yields set by Sky governance and funded through protocol revenues.
PYUSD was added to SparkLend after passing the protocol’s risk assessments.&nbsp;&nbsp;
Related: <a href="https://cointelegraph.com/news/aave-sky-float-partnership-bridge-defi-tradfi" rel="noopener noreferrer nofollow">Aave, Sky float partnership to bridge DeFi, TradFi</a>
<h2 id="stablecoin-market-nears-300-billion">Stablecoin market nears $300 billion</h2>
With Europe’s <a href="https://cointelegraph.com/learn/articles/markets-in-crypto-assets-regulation-mica" rel="noopener noreferrer nofollow" target="_self">Markets in Crypto-Assets Regulation</a> (MiCA) taking effect in January and US passage of stablecoin regulation with the <a href="https://cointelegraph.com/explained/what-does-the-us-genius-act-mean-for-stablecoins" rel="noopener noreferrer nofollow">Genius Act</a> in July, the stablecoin market has been surging.
<a href="https://defillama.com/stablecoins" rel="noopener noreferrer nofollow" target="_blank">DefiLlama</a> data shows the stablecoin market capitalization is nearing $300 billion, up over $90 billion since the start of the year.
<figure><img alt="Spark integrates PayPal USD into its stablecoin lending markets" src="https://s3.cointelegraph.com/uploads/2025-09/0199810d-13f3-7532-b69e-420bfeb8f506" title="">
 <figcaption style="text-align: center;">Total Stablecoins Market Cap. Source: DefiLlama 
 </figcaption>
</figure>
Overall stablecoin growth has been matched by rising demand for <a href="https://cointelegraph.com/news/yield-bearing-stablecoin-supply-surges-after-genius-act" rel="noopener noreferrer nofollow">yield-bearing stablecoins</a>. Ethena’s USDe and Sky’s USDS have seen strong momentum, with USDe’s supply growing 70% and USDS expanding by 23% since July 18, when the <a href="https://cointelegraph.com/news/genius-act-scrutinized-stablecoin-yield-ban-tradfi-tokenization" rel="noopener noreferrer nofollow" target="_self">Genius Act was signed into law</a>.
In August, Coinbase revived its <a href="https://cointelegraph.com/news/yield-bearing-stablecoin-supply-surges-after-genius-act" rel="noopener noreferrer nofollow" target="https://cointelegraph.com/news/yield-bearing-stablecoin-supply-surges-after-genius-act">Stablecoin Bootstrap Fund</a> to inject liquidity for USDC across DeFi platforms, including Aave and <a href="https://cointelegraph.com/news/gauntlet-joins-morpho-after-abrupt-end-with-aave" rel="noopener noreferrer nofollow" target="https://cointelegraph.com/news/gauntlet-joins-morpho-after-abrupt-end-with-aave">Morpho</a> — though the exchange did not disclose the size of the fund.
A Binance Research report <a href="https://cointelegraph.com/news/defi-lending-rises-72-institutional-rwa-collateral-adoption" rel="noopener noreferrer nofollow" target="_self">shared with Cointelegraph</a> in September noted that as stablecoin adoption accelerates, “DeFi lending protocols are increasingly positioned to facilitate institutional participation.”
DeFi lending markets expanded by more than 70% year to date in September, with institutional demand cited as a key driver.
<figure><img alt="Spark integrates PayPal USD into its stablecoin lending markets" src="https://s3.cointelegraph.com/uploads/2025-09/0199810a-610f-75f8-b98c-4c14da513ae7" title="">
 <figcaption style="text-align: center;">DeFi lending protocols, TVL, year-to-date chart. Source: Binance Research
 </figcaption>
</figure>
The shift toward stablecoins that generate yield has been described as <a href="https://cointelegraph.com/news/second-generation-stablecoins" rel="noopener noreferrer nofollow">“stablecoin 2.0.”</a> While “first-generation” tokens like Tether’s USDt (<a href="/tether-price-index" rel="noopener noreferrer nofollow">USDT</a>) focused on digitizing the US dollar and putting it onchain, a “second generation” of stablecoins is seeking to create new utility by generating yield alongside liquidity.
Magazine: <a href="https://cointelegraph.com/magazine/eth-ethereum-treasury-firms-could-spark-defi-summer-2-0-race-for-yields/" rel="noopener noreferrer nofollow" target="_self">How Ethereum treasury companies could spark ‘DeFi Summer 2.0’</a>

Spark integrates PayPal USD into its stablecoin lending markets

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