The stablecoin market is splintering into dozens of competing tokens, each issued by a different company trying to keep users and transaction activity locked inside its own ecosystem. As PayPal, Circle, Robinhood, Stripe, and Coinbase all launch their own dollar-linked tokens, one DeFi (decentralized finance) platform is betting it can profit from the chaos by becoming the infrastructure layer that moves money between them.

Why Are Tech Giants Creating Their Own Stablecoins?

A stablecoin is a cryptocurrency designed to maintain a stable value, typically pegged to the US dollar or another asset. Unlike Bitcoin or Ethereum, which fluctuate wildly, stablecoins aim to stay at a fixed price, making them useful for payments and storing value without volatility.

The rush to create proprietary stablecoins reflects a fundamental shift in how companies view blockchain infrastructure. Each issuer wants to keep users, reserves, and transaction activity inside its own network as competition ramps up. PayPal has PYUSD, Circle has USDC, Tether has USDT, Robinhood joined the Global Dollar (USDG) consortium and is building its own chain, and OpenUSD (OUSD) is another large consortium that includes Stripe and Coinbase. Beyond these giants, there are hundreds of other stablecoins, including Ethena's USDe, World Liberty Financial's USD1, and Sky's USDS.

"The stablecoin landscape is about to fragment more and more," said Sam MacPherson, CEO of Phoenix Labs.

Sam MacPherson, CEO of Phoenix Labs

The result is liquidity scattered across an expanding number of tokens and networks. This fragmentation creates a real problem: if you hold PYUSD but need to transact in USDC, you face friction, slippage (the difference between expected and actual prices), and delays moving money between incompatible systems.

How Can Spark Profit From Stablecoin Fragmentation?

Spark, an affiliated lending and liquidity unit of Sky (the DeFi ecosystem formerly known as MakerDAO), is betting those networks will still need to connect. Its aim is to be the layer that moves money between them. Spark is developed by Phoenix Labs and supported through Sky's governance and capital.

The platform's strategy centers on three key approaches:

• Stablecoin FX Layer: Spark built a stablecoin foreign exchange layer on Uniswap, the largest decentralized exchange, designed to help institutions switch between stablecoins by concentrating liquidity in yield-bearing pools. The system accounted for about 30% of stablecoin-to-stablecoin swap volume on Uniswap and routed roughly $1.5 billion in its first 30 days.
• Direct Infrastructure Deals: Spark has struck infrastructure deals directly with stablecoin issuers. PayPal teamed up with Spark last year to boost the liquidity of PYUSD as it competes with Tether's USDT and Circle's USDC.
• B2B2C Distribution: Rather than build its own consumer app, Spark supplies yield and liquidity to apps consumers already use. Robinhood's Earn product, which offers roughly 7% APY on USDG deposits, routes users' funds into a Morpho onchain vault curated by decentralized advisory firm Steakhouse Financial. The vault allocates funds across lending markets involving Ethena's USDe, Maple's syrupUSDG, and Spark's spUSDG. It has drawn more than $200 million in deposits in the last 24 days.

The mechanism underneath Spark's liquidity layer is a Uniswap v4 hook called DualPool. It keeps liquidity-earning yield in Spark's vaults while idle and pulls it into the pool only when a swap needs it, settling it within a single block. This design minimizes the capital sitting unused while maximizing returns for liquidity providers.

Spark migrated about $150 million into Uniswap v4 pools pairing USDS against USDT and PYUSD. MacPherson pointed to Robinhood's Earn product as evidence that the model is working. "Robinhood is quite large, and so we expect this to grow to billions in size," he said.

What Happened to Spark's Consumer App Strategy?

Spark's pivot to backend infrastructure represents a dramatic strategic reversal. Late last year, the platform shelved a consumer-facing app that would have placed it in direct competition with Coinbase, PayPal, and Robinhood for retail users. In November, MacPherson had said Spark's app was "paused, not canceled." Now, he said it was "paused indefinitely".

In November, MacPherson had

"Consumer apps are extremely hard to compete in," said Sam MacPherson, CEO of Phoenix Labs, explaining that shelving the app was "definitely the correct decision."

Sam MacPherson, CEO of Phoenix Labs

Rather than build its own customer relationships, Spark started supplying yield and liquidity to apps consumers already use. MacPherson described the strategy as "doubling down on this more B2B or B2B2C model." This shift reflects a broader realization in crypto infrastructure: competing directly with well-funded fintechs for retail users is nearly impossible, but supplying the backend services those fintechs need is a defensible business model.

How Is Spark Performing Financially?

The transition has come during a difficult stretch for decentralized finance. Spark's annual revenue fell from about $80 million during the bull market to roughly $20 million today. However, the firm's fastest-growing line of business is Bitcoin-backed over-the-counter loans issued through Anchorage, which stand at about $260 million in outstanding balance, with roughly $400 million originated and a target of $1 billion by year-end.

Demand for these loans comes partly from borrowers such as Bitcoin miners, who "need to fund operations at all times regardless of whether it's a bull or bear market," MacPherson said. The bottleneck, he added, is onboarding speed. Spark Prime, a hybrid prime brokerage combining centralized and onchain financial services, holds about $20 million in outstanding loans and remains in deliberate beta.

MacPherson said most major crypto funds are onboarding and that conversations with traditional finance firms are increasing, partly because venues like Hyperliquid have drawn institutional interest to crypto-native trading of equities and other assets. The protocol is also pursuing credit ratings from S&P and Moody's alongside assessments from crypto-native agencies such as Credora. Such ratings could help institutional risk teams assess Spark before approving it as a counterparty.

What Does This Mean for the Future of Stablecoins?

MacPherson sees payments as the catalyst that turns fragmentation into volume. With the GENIUS Act coming into force next year and the Clarity Act potentially advancing, he projects onchain payments could reach $3 trillion by 2030. "It's going to seem like nothing's happening," he said, "and then all of a sudden a lot is going to happen at once".

Spark's bet is that fragmentation creates a valuable role for a neutral intermediary, one that becomes harder to justify if issuers keep their liquidity inside their own networks. By positioning itself as the infrastructure layer that connects competing stablecoins, Spark is wagering that the future of crypto payments will require bridges between incompatible systems, not a single dominant token. Whether that bet pays off depends on whether regulators allow stablecoin proliferation to continue and whether institutions actually adopt onchain payments at scale.