Cryptocurrency lenders—a growing subset in that industry, albeit still a side group—are about to be able to conduct their first consumer credit checks. TransUnion, one of big three credit agencies, is partnering with a fintech startup called Spring Labs to put its credit reports on the blockchain, theoretically giving lenders willing to work with crypto a better ability to assess the risk profiles of borrowers who don’t want regular legal tender.
TransUnion and Spring Labs announced Wednesday that TransUnion’s consumer credit data will be added “on-chain,” as it’s known, via a platform called the ky0x Digital Passport. This should be welcome news for this set of borrowers because it could mean lower interest rates or even an opportunity to take out loans without having to offer up Bitcoin, Ethereum, or other digital assets as collateral—which is the way they currently get loans.
“With TransUnion’s identity and credit data,” Spring Labs CEO John Sun said in the two companies’ press release, “we’re providing the first building block to bringing reputation on-chain, in turn helping create a more efficient DeFi lending environment that can offer better loans, more available liquidity, and ultimately accelerate adoption in the space.”
(DeFi refers to “decentralized finance,” a system built on blockchain without banks or other intermediaries.)
Steve Chaouki, a TransUnion U.S. president, added that this partnership provides “a solution for users to control and share their data on blockchain in a privacy-preserving way, enabling them to safely interact with a broader set of financial products.”
For many people, this whole idea will sound very out there. Imagine attempting to comprehend the first line of TransUnion and Spring Labs’ press release back in, say, 2015: “Spring Labs is bringing TransUnion’s identity and credit data on-chain via the ky0x Digital Passport to help accelerate Web3 and DeFi adoption.”
But TransUnion is hoping to grab onto the front end, and it’s been inching toward crypto for a while: In April 2021, it invested in Spring Labs directly, leading a funding round that netted $30 million. The startup has argued it will “revolutionize” consumer financial data by bridging the gap between the digital-asset world and our heavily regulated financial system. After investing, TransUnion told media it was impressed with the “real-life applications” that Spring Labs has demonstrated.