TransUnion and Spring Labs plan to make creditworthiness checks a part of crypto lending. This is in response to plans to include credit scores in their Digital Passport, which allows for the issuance of digital asset loans.
Crypto Lending Market Introduces Credit Score System
The Wall Street Journal reported TransUnion, a major U.S. consumer credit reporting company, had announced a partnership to provide access to credit scores reports for the crypto lending market.
TransUnion revealed that it plans to provide customers with this facility via Ky0x Digital Passport. This solution was developed by Spring Labs to bridge between web 3.0 applications, custom off-chain data, and the Internet.
The digital passport gives users know-your-customer (KYC) and anti-money-laundering (AML) identity verification badges while protecting personal data from public access. Before the year 2022, users will be able attach their credit scores reports to their digital wallets.
TransUnion customers have a greater chance of getting better interest rates if they have the passport in place, both companies claim. The inclusion of credit scores on the digital passport allows blockchain companies to access creditworthiness checks. This could open the door for zero-collateral loans.
Both parties believe that this will open up new opportunities for digital asset lending and foster trust between customers and lenders by reducing risks.
Steve Chaouki, President of U.S. Markets and Consumer Interactive at TransUnion, stated that the firm is aware of the potential growth in the DeFi market. This is why it sees the opportunity to offer users the tools they need to interact safely with a wider range of financial products.
Chaouki stated that the partnership encourages competition on the market and motivates companies to create more user-centric apps while still adhering to regulatory policies.
This is the latest development in both companies. Spring Labs received $30 million in funding in 2021 to expand its data-exchange network. TransUnion led the funding round.
US Regulators Are Looking for Crypto Lenders
Crypto lending providers in the U.S. continue to face regulatory uncertainty. According to reports, the Securities and Exchange Commission (SEC), has taken action against a variety of platforms that were looking to offer their services.
After legal pressure from the Commission, Coinbase had previously stopped plans to offer a crypto-lending product to U.S. customers. BlockFi, a digital asset trading and lending platform that centralized trades and lends digital assets, was forced to cease operations by the New Jersey Bureau of Securities in July 2021. Celcius, a popular cryptocurrency lender, was also served with a similar order.
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