TransUnion’s crypto will now check credit data for the crypto lending space

Institutions that lend cryptocurrency will now have the ability to check credit reports. For example, TransUnion (NYSE: TRU), a major consumer credit reporting firm in the United States, will allow for consumers to give blockchain corporations access to their personal credit information via the ky0x Digital Passport from Spring Labs. 

Customers will now be able to get better interest rates when they borrow from financial-services firms that are on public blockchain platforms, like Ethereum, when they provide this data. 

Current status quo

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Crypto investors can currently borrow funds by putting digital assets like BTC and ETH as collateral. However, now that lenders can check the creditworthiness of a borrow, they may be able to award loans without asking for any collateral whatsoever. 

More and more big financial-services organizations have started to take part in the cryptocurrency boom that’s taking place worldwide. For example, Fidelity Investments and Bank of New York Mellon Corporation have announced plans to offer cryptocurrency services to institutional clients like hedge funds and asset managers. 

Banks outside the United States, such as the Commonwealth Bank of Australia and Banco Bilbao Vizcaya Argentaria, have begun to look at the different ways they can offer clients the ability to store and invest BTC and other digital assets. 

Rise of decentralized finance (DeFi)

The market for DeFi assets has grown a lot over the past couple of years. The total value of decentralized finance applications on the Bitcoin and Ethereum blockchain platform rose from $20 billion in 2020 to almost $200 billion as of November 2021, according to financial analysts at JPMorgan. 

However, the decentralized finance space still needs to face numerous regulatory hurdles before becoming fully mainstream. The JPMorgan analysts said:

Enforcing know-your-customer and anti-money-laundering checks is a necessary first step, but a general perception that regulations would be naturally less effective on DeFi might prove a major obstacle going forward in terms of regulators allowing DeFi to transition into the mainstream.

The digital passport from Spring Labs currently features know-your-customer and money-laundering verifications after a user completes the registration process and gets their digital wallet up and running. No personal information is shared publicly.