SAEP-08: Offchain Collateralized Lending - December 8, 2025

Spark's Operational Facilitator has placed a proposal into the voting system on behalf of nested contributor Phoenix Labs.

Review

The Spark community can hereby express support or opposition to the following changes, as described by the author of the proposal:

Summary

This proposal is submitted by Phoenix Labs in its role as a nested contributor, as defined in section A.6.1.1.1.2.2.2.2.1.2.1.1.1 - Root Edit Proposal Submission Requirements Exception For Nested Contributors of the Spark Artifact. The proposal recommends that Spark governance adopt the following operational processes and mandate for allocating funds to offchain collateralized lending arrangements.

Background

Spark and the broader Sky ecosystem have been deeply involved in collateralized lending for years, with MakerDAO’s original core CDP system as one of the first collateralized loan products offered in DeFi. Spark continues to allocate a significant share of the balance sheet to onchain collateralized lending via SparkLend, Morpho, and other venues.

But, while onchain collateralized lending is central to Spark protocol, extending collateralized loans in an offchain/CeFi environment can provide certain advantages and open up new sources of sustainable demand. Certain users have a strong preference for collateralized lending facilitated in custodial/offchain services, due to regulatory requirements, risk preference, tax considerations, or from desire for specific product features like fixed rates or margin calls/delayed liquidations. Due to a combination of the above factors, there are billions of dollars of borrow demand that can be served via offchain collateralized lending that have not been willing to come onchain into Ethereum DeFi despite persistent several percentage point discounts between offchain and onchain rates.

Spark currently accesses the offchain collateralized lending opportunity set via the Maple protocol and syrupUSDC. This has worked very well to date, and Spark contributors generally expect the relationship with Maple to continue well into the future. But there is also significant value in developing additional pathways to deploy Spark liquidity into offchain lending more directly. Certain prospective borrowers have expressed that they prefer to work directly with the end funder with fewer intermediaries, others note that they are running up against counterparty concentration limits with Maple already. Beyond this, Maple generally restricts loan duration to 1 month or less to ensure adequate liquidity for withdrawals, so there is a potential underserved segment of intermediate duration loans (3-6 months).

This proposal defines a framework and operational mandate for Spark, via Spark Asset Foundation as legal owner of funds within the SLL, to engage in Offchain Collateralized Lending arrangements where collateral assets and loans are disbursed and managed within qualified custodians. Key loan servicing and collateral management functions can also be outsourced to reputable service providers, ensuring that Spark and related contributors incur limited operational overhead and are primarily concerned with risk underwriting and pricing at the point of loan origination. The loan origination and account management lifecycle is locked down and optimized to minimize counterparty risks and potential for operational failures by Spark Asset Foundation or Spark contributors.

Proposal Details

We propose that Spark governance ratify and adopt the operational processes and mandate for allocating capital into Offchain Collateralized Lending arrangements via qualified custody.

Justification

Historically, we have seen a durable and persistent spread of 1-3% higher borrow rates for offchain collateralized lending vs onchain DeFi lending, with only very brief inversions during periods when DeFi rates spike. Offchain OTC lending rates also tend to show better stability, with Maple’s syrupUSDC product for example having less than 1% variance in yield within the past 3 months. Having another method to tap into this source of borrow demand will be beneficial for Spark to diversify revenue streams, particularly for periods when DeFi leverage demand is muted like it has been over the past few weeks.

Operationally, undertaking Offchain Collateralized Lending via custodians will involve transferring liquidity to an offchain custody master account, and then further transferring this liquidity to the borrower after execution of an appropriate master loan agreement (MLA) and receipt of required collateral by the collateral agent. Because the specific terms of the deal are set offchain and cannot be set in smart contracts, we rely on the Spark Artifact as edited above to define the permitted scope and terms of offchain lending activity.

We specify the outer bounds of accepted risk parameters and loan terms in this proposal, meaning no loans may be issued with terms outside of these thresholds. However, we expect that the majority of loans will have tighter risk requirements and higher pricing benchmarks vs the details specified in the proposal, to ensure we are aligning with broader market pricing trends and generating adequate risk compensation on the positions. For example, for loans issued with longer duration fixed rates (e.g., 3 to 6 months), we expect to charge a significantly higher spread vs the SOFR and SSR benchmarks vs the minimum listed in the proposal.

Initially, we plan to work with Anchorage (as custodian) and Anchorage Innovations (as collateral agent) as they provide an integrated solution that combines highly secure custody with a full service collateral management, origination, and liquidations experience that essentially handles the entire loan lifecycle from origination through to repayment. Additional custodians and collateral agents may be considered in the future if appropriate, but Anchorage is a suitable first choice given their long track record, comprehensive product suite, prior integration and onboarding with many prospective borrowers, and good regulatory standing.

The proposed Spark Artifact changes can be found in the following pull request: https://github.com/sky-ecosystem/next-gen-atlas/pull/140

Outcomes

• If "For" receives the most votes, the proposal will be approved. The associated pull request will be merged into Spark's artifact. When required, the listed changes will proceed to implementation by the relevant actors.
• If "Against" receives the most votes, the proposal will be rejected. No changes will be implemented.