Credit checks may soon be a thing in crypto lending following plans by TransUnion and Spring Labs to introduce credit scores as part of the latter’s digital passport for obtaining asset loans. digital.
Credit Score System Introduced to Crypto Lending Market
The Wall Street Journal reported that TransUnion, a leading consumer credit reporting company in the United States, announced a partnership with security firm Spring Labs to enable access to personal credit reports in the market for crypto loans.
The coverage revealed that TransUnion plans to enable customers of 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 reports to their digital wallets before the end of 2022.
With the passport in play, TransUnion customers have a better chance of earning better interest rates, according to the two companies. Additionally, embedding credit scores on the digital passport that blockchain businesses can access introduces credit checks and could pave the way for collateral-free lending.
Both entities believe that this move will create better opportunities in the digital asset lending economy while fostering greater trust between lenders and customers by reducing the risks involved.
Speaking at the announcement, President of US Markets and Consumer Interactive at TransUnion Steve Chaouki explained that the company recognizes the growth potential of the DeFi space. As such, he sees this as the perfect opportunity to provide users with the tools to securely interact with a broader set of financial products.
Chaouki also added that the partnership drives competition in the market and pushes companies to develop more user-centric applications while remaining compliant with regulatory policies.
The news is the latest development involving the two entities. In 2021, Spring Labs raised $30 million in funding to support greater access to the enterprise data exchange network. The financing round was led by TransUnion.
US regulators crack down on crypto lenders
Regulatory uncertainty remains an issue for crypto lending providers in the United States. The Securities and Exchange Commission (SEC) has reportedly cracked down on a number of platforms seeking to offer their services.
Coinbase previously halted plans to introduce a crypto lending product to customers in the United States following legal pressure from the Commission. BlockFi, a centralized digital asset lending and trading company, ceased operations after receiving a cease and desist order from the New Jersey Bureau of Securities in July 2021. A similar order was also served on the well-known Celcius cryptocurrency lender.
Featured image courtesy of Yahoo
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