TransUnion To Enable Crypto Lenders Check Consumer Credit Score

For the first time in the industry, cryptocurrency lenders will be able to conduct consumer credit checks.

Bishal Kumar Chanda3 min read
TransUnion To Enable Crypto Lenders Check Consumer Credit Score

American credit reporting firm TransUnion has partnered with a fintech startup called Spring Labs to introduce credit scores in the crypto lending space. Spring Labs’ ky0x Digital Passport consists of identity verification protocols, including KYC and anti-money laundering checks. Putting the credit reports on the blockchain and Spring Labs’ extra layer of security will give lenders a better ability to check high-risk borrowers who want crypto loans.

TransUnion and Spring Labs announced that they would add the former’s consumer credit data to the blockchain on a platform called ky0x Digital Passport. It is a piece of welcome news for lenders, and crypto borrowers as consumers with a good credit score can get fairer interest rates. Consumers currently borrow money by providing collateral in cryptocurrencies such as Bitcoin, Ethereum, etc. Using Transnion’s credit scores, lenders can now check the creditworthiness of their customers and may even start issuing collateral-free crypto loans.

After the crypto boom of 2021, more and more financial institutions are starting to participate in the cryptocurrency space. Fidelity Investments and Bank of New York Mellon Corp would be providing crypto services for institutional clients like hedge funds and asset managers. Some banks outside the US, like Commonwealth Bank of Australia and Banco Bilbao Vizcaya Argentina, are already exploring ways to enable customers to invest and hold cryptocurrency and other digital assets. But traditional consumer banks consider cryptocurrency the riskiest asset they can have and remain wary of it.

The decentralized finance (DeFi) market has grown by leaps and bounds in recent years. The total valuation of all DeFi applications on the Ethereum blockchain rose more than ten times in 2021 than in 2020. But DeFi has yet to become mainstream, subjecting several regulatory hurdles. Spring Labs has taken a necessary first step by enforcing KYC and anti-money laundering checks. But the general perception of a regulation-free DeFi can be a significant hurdle in regulators allowing DeFi to become mainstream. Crypto lenders like Nexo and Celsius Network have already come under scrutiny from state and federal regulators in the United States. We can only see hope in TransUnion’s promise of closing the gap between the crypto world and the heavily regulated financial system.

Earn more with Bitcompare

The best deals, tools, reviews and tips in your inbox once a week.

No spam, unsubscribe anytime. Read our Privacy Policy.