American credit reporting firm TransUnion is set to introduce credit scores to the crypto lending space, the Wall Street Journal reported on Wednesday.
TransUnion has partnered with security outfit Spring Labs to use the latter’s ky0x Digital Passport service for credit data checks for cryptocurrency lending transactions. Spring Labs’ ky0x Digital Passport incorporates identity verification protocols including know-your-customer and anti-money laundering (KYC/AML) checks.
As part of the process, blockchain companies will have access to consumers’ credit scores when issuing loans to such users. The move will introduce creditworthiness checks for borrowers in the crypto lending market, especially for zero-collateral loans, the WSJ report stated. Users with good credit ratings will be able to secure loans at fairer interest rates.
According to Steve Chaouki, president of U.S. markets at TransUnion, introducing credit scores to crypto lending will incentivize greater participation from mainstream entities. Both companies plan to have the credit scoring system on the Digital Passport before the end of the year.
Meanwhile, crypto lending platforms have come under scrutiny from state and federal regulators in the United States. In October 2021, crypto lenders Nexo and Celsius were linked to a probe by the New York Attorney General’s office.