Galaxy Digital has invested $100m in Sky Protocol’s sUSDS and approved the yield-bearing stablecoin as collateral across its institutional trading operation, as the two companies expand their lending relationship.
The purchase was funded from Galaxy’s own balance sheet, the company’s Head of Lending Max Bareiss told The Block. Galaxy held nearly $2.5bn in cash and stablecoins as of 30 June and said it was among the first public companies to hold sUSDS.
Galaxy has also bought an undisclosed quantity of SKY tokens, according to Greg Feibus, Global Head of Capital Markets at Sky Frontier Foundation.
“Holding SKY is emblematic of the breadth of the integration across treasury and lending,” Feibus told The Block. “Galaxy views Sky’s ability to generate meaningful protocol revenue across market environments, alongside the growing institutional use of its broader ecosystem, as central to the investment thesis.”
The new arrangement allows Galaxy clients to use sUSDS as collateral for loans while continuing to receive the Sky Savings Rate – the variable return accrued by the stablecoin – on the full value of their holdings throughout the loan period.
Galaxy said its institutional platform has more than 1,600 trading counterparties, while its institutional trading business has an average loan book of $1.4bn.
Feibus said interest from institutions in Sky’s ecosystem had increased since S&P Global assigned Sky Protocol a ‘B-’ credit rating last year.
“In traditional markets, pledging Treasurys or other assets as collateral for financing is extremely common,” Feibus said. “As traditional financial firms move onchain, using a yield-bearing dollar asset like sUSDS as collateral is a natural extension of that workflow.”
He added that institutions could assess how Sky generates protocol surplus revenue and independently verify its collateral and balance sheet onchain.
“That is a must from an underwriting perspective,” Feibus said.
Sky reported that the supply of sUSDS stood at $5.52bn at the end of the second quarter, representing a 149% increase from a year earlier.
Wider onchain financing arrangements
Galaxy and Sky already have several lending agreements in place. Grove, a Prime Agent within the Sky ecosystem, provides Galaxy with a $500m warehouse facility for institutional loans backed by digital assets.
In January, Grove also anchored Galaxy’s $75m tokenized CLO on Avalanche with a $50m allocation.
Galaxy has separately borrowed through Spark, a Sky capital allocator, to support its Galaxy Onchain Financing Rate, or GOFR. Launched in July, GOFR draws on lending protocols including Aave, Morpho, Spark and Kamino to produce a blended borrowing rate.
The companies have now created a new tri-party borrowing arrangement that diversifies Galaxy’s funding sources and links the financing more directly to GOFR, Feibus said.
They are also discussing an expansion of the existing $500m warehouse facility, although no proposed new size has been announced.
