Credit rating agencies enter the blockchain! TransUnion USA Provides Credit for DeFi Lending

Credit rating agency giant TransUnion has partnered with data security firm Spring Labs and DeFi identity and compliance software developer Quadrata to begin offering credit scores for the DeFi lending platform next week, CoinDesk reports, adding that TransUnion will offer individuals on the blockchain protocol without compromising applicant privacy provide a traditional (off-chain) credit score when applying for a loan.

Last year's brutal cryptocurrency bear market led to a wave of defaults on unsecured cryptocurrency loans. Walter Tencent, vice president of digital assets at market research firm Fundstrat, said in a report that this highlights the vulnerability of unsecured loans in the digital asset market, which could have been mitigated if credit scores for cryptocurrency borrowers had been provided.

Jason Lucky, executive vice president of financial services at TransUnion, said credit scoring is an important tool to help lenders reduce risk, and TransUnion's credit scoring system, which allows consumers to use their credit history to securely share their own credit information with any blockchain-based lending agreement, also helps lenders improve decision-making and risk management.

Loan applicants can request their credit scores from TransUnion, which are then sent directly to consumers through Spring Labs, where excerpts are later shared with lenders.

Credit rating agencies move into the blockchain space

Traditional financial services and the cryptocurrency market have become more intertwined as traditional financial firms step up their exploration of how to leverage blockchain technology and its place in traditional markets to serve cryptocurrency investors, and TransUnion's latest move is part of this larger trend.

Last year, TransUnion's competitor, credit rating agency giant Equifax, partnered with Oasis Labs to develop identity management and KYC compliance solutions for blockchain companies, and another competitor, Equifax, has been working with DeFi lending platform Credefi to score green companies for EU businesses.

This comes just after TransUnion and Spring Labs launched TrueZero, a privacy-focused data-sharing service that allows financial institutions to send messages without revealing sensitive personal data, such as credit data, in October last year, and TransUnion is one of Spring Labs' investors.