In a presentation at the Singapore Fintech Festival, Annerie Vreugdenhil, Director of Innovation at ING announced that it is working on a test of its peer lending protocol for decentralized finance (DeFi) with the Dutch Financial Market Authority. Vreugdenhil had the following to say about the development, as reported by Ledger Insights:
We consider peer-to-peer lending in a DeFi configuration. But not in bitcoins. We are interested in how you are likely to be able to create peer-to-peer loans or open credit facilities with different types of collateral. So with different ways of doing this instead of volatile bitcoin.
ING is a Dutch multinational financial services company with over USD 1 trillion in total assets under management. In a white paper released earlier this year, ING specifically mentioned the Aave credit protocol, which is based on the Ethereum (ETH) blockchain, as the latest innovation in the industry. With smart contracts, Aave enables borrowers to deposit cryptocurrencies as collateral and obtain a loan in stablecoins.
The mechanism can be used like a traditional property loan, borrowing debt to meet day-to-day expenses while investments keep growing. In line with ING’s concerns about using volatile assets as collateral, Aave also allows stablecoin lending and borrowing. At the time of this writing, borrowers can earn around 3% annual interest by depositing their DAI into floating rate pools, while lenders pay 4% annual interest and vice versa.
While ING praised DeFi for its limitless payments, 24/7 operations and the speed of transactions, the white paper points out several drawbacks. In particular, since borrowing and loan protocols require collateral, they do not allow the creation of new money for initiatives such as business and entrepreneurship financing.
However, ING has generated a lot of interest in the blockchain industry in recent years. By the end of 2020, ING has joined the Blockchain Education Alliance. The company also began custody of digital assets in 2021 and discussed a number of stablecoin developments during a conference in April this year.