In its DeFi lending solution, which is currently in development, the financial services firm is only considering non-volatile assets as collateral.
ING’s chief innovation officer, Annerie Vreugdenhil, announced during a presentation at the Singapore Fintech Festival that the company is working with the Netherlands Authority for Financial Markets on a trial of its decentralized finance, or DeFi, peer-to-peer lending protocol. Vreugdenhil stated the following about the development:
We’re looking into peer-to-peer lending in a DeFi setting. However, not on Bitcoins. What interests us is how you might be able to create peer-to-peer lending or open up lending capabilities with various types of collateral. So, rather than using volatile Bitcoin, try different approaches.
ING is a Dutch multinational financial services company with over $1 trillion in total managed assets. ING specifically mentioned lending protocol Aave, which is built on the Ethereum (ETH) blockchain, as one recent innovation in the industry in a white paper published earlier this year. Aave uses smart contracts to allow borrowers to deposit crypto as collateral and obtain a stablecoin loan.
The mechanism can be used in the same way that a traditional asset loan is, in that debt can be taken out to pay for daily expenses while one’s investment continues to compound. Aave, in response to ING’s concerns about using volatile assets as collateral, allows for the borrowing and lending of stablecoins. Borrowers can earn approximately 3% interest per year by depositing their DAI into variable-rate pools at the time of writing, while lenders pay 4% interest per year, and vice versa.
While ING applauds DeFi for its borderless payments, 24/7 operations, and transaction speed, its white paper identifies several drawbacks. Borrowing and lending protocols, in particular, do not allow for the creation of new money for initiatives such as financing companies and entrepreneurs because they require collateral.
Nonetheless, ING has become increasingly interested in the blockchain industry in recent years. ING will join the Blockchain Education Alliance at the end of 2020. In addition, the company started working on digital asset custody in 2021 and discussed a number of stablecoin developments at a conference in April of this year.