Security company Spring Labs and TransUnion have reportedly teamed up to bring a replication of credit rating to cryptocurrency lending and borrowing. The partnership will see Spring Labs introducing similar checks of creditworthiness in its ‘Digital Passport’ project, just as is obtainable with normal loans.
Spring Labs Introduces Credit Score System To Crypto Lending Market
From all indications, creditworthiness checks may soon become a norm in the crypto lending space. According to a report by the Wall Street Journal, the partnership was announced by TransUnion — a leading customer credit reporting firm in the U.S.
Also, the WSJ report says that TransUnion will be carrying out the customer credit checks through Ky0x Digital Passport — a solution developed by Spring Labs to integrate web 3.0 applications and custom off-chain data.
With this digital passport, users can earn badges after passing through the anti-money-laundering (AML) and know-your-customer (KYC) identity verification processes. Additionally, users will be allowed to attach their credit score reports to their digital wallets by 2022 ending.
Importance of The Partnership
Meanwhile, both companies strongly believe that with this partnership, TransUnion customers now stand a better chance of receiving improved interest rates. In addition to that, credit scores being incorporated on digital passports could even throw the access to zero-collateral loans, open to users.
More importantly, the two partner companies have expressed confidence in that the collaboration will bring about better opportunities in the digital asset lending economy. And since there will be less risks involved, it will ultimately breed better trust between lenders and customers.
Interestingly, this is not the first time Spring Labs and TransUnion are collaborating. Just last year, Spring Labs raised $30 million in a funding round that was led by TransUnion. The fund was raised to bolster the firm’s data exchange network.
Crypto Lenders Not Sure About The Stance of U.S Regulators
With lack of regulatory clarity still a topical issue in the U.S, crypto lending providers are still unsure what to expect from regulators.
Coinbase for example, had to halt its crypto lending plans amid legal threats from SEC.
In July 2021, lending outfit BlockFi also received a desist and order from the New Jersey Bureau of Securities. Celsius is another lender who got served a similar order at another time.