Creditworthiness checks may soon be a thing in the crypto lending arena following plans by TransUnion and Spring Labs to introduce credit scores as part of the latter’s Digital Passport for obtaining digital asset loans.
Credit Score System Introduced In Crypto Lending Market
The Wall Street Journal reported that TransUnion, a major consumer credit reporting firm in the U.S., announced a partnership with security company Spring Labs to bring access to personal credit score reports into the crypto lending market.
The coverage disclosed that TransUnion plans to enable customers with this facility through Ky0x Digital Passport, a solution developed by Spring Labs to bridge the gap between web 3.0 applications and custom off-chain data.
The digital passport gives users know-your-customer (KYC) and anti-money-laundering (AML) identity verification badges while protecting personal data from public access. Users will also be able to attach their credit score reports to their digital wallets before the end of 2022.
With the passport in play, TransUnion customers stand a better chance of receiving improved interest rates, according to both companies. Also, incorporating credit scores on the digital passport for blockchain companies to access introduces creditworthiness checks and could pave the way for zero-collateral loans.
Both entities believe this move will create better opportunities in the digital asset lending economy while also fostering greater trust between lenders and customers by reducing the risks involved.
Speaking on the announcement, President of U.S. Markets and Consumer Interactive at TransUnion Steve Chaouki explained that the firm recognizes the growth potential of the DeFi space. As such, it sees this as the perfect opportunity to provide users with the tools needed to safely interact with a broader set of financial products.
Chaouki also added that the partnership stimulates competition in the market and drives companies to develop more user-centric applications while remaining compliant with regulatory policies.
The news comes as the latest development involving both entities. In 2021, Spring Labs raised $30 million in funding to foster greater access to the firms’ data-exchange network. The funding round was led by TransUnion.
US Regulators Going After Crypto Lenders
Regulatory uncertainty remains an issue for crypto lending providers in the U.S. The Securities and Exchange Commission (SEC) has reportedly cracked down on a number of platforms looking to offer their services.
Coinbase previously halted plans to introduce a crypto lending product to customers in the U.S. following legal pressure from the Commission. BlockFi, a centralized trading and lending digital asset outfit stopped operations after receiving a cease and desist order from the New Jersey Bureau of Securities back in July 2021. A similar order was also served to popular cryptocurrency lender Celcius.
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