ING – the Dutch multinational banking corporation – has begun collaborating with the Netherlands’ financial authority on utilizing decentralized finance.
The Bank’s Defi Project
Annerie Vreugdenhil – ING’s Chief Innovation Officer – said as much at the Singapore Fintech Festival earlier today. Speaking in a panel discussion, the CIO complimented Singapore’s welcoming regulatory environment. As reported last week, the Monetary Authority of Singapore has no plans on banning Bitcoin. Furthermore, the leader of Singapore’s central bank has shown openness to stablecoin innovation.
“In other places, we work with sandboxes that regulators have,” said Vreugdenhil. “We actually have in Amsterdam now an initiative on DeFi on P2P lending where we are starting to work with the regulator.”
Apparently, the bank has plans to test its Defi lending project using the Authority of the Financial Market (AFM) sandbox. The AFM sandbox is a Dutch regulatory gateway for innovative financial products. It allows new businesses to innovate in the space without undue burdens from authorities.
A spokesperson for ING stated later that no concrete proposition had been developed for the regulator yet. However, the bank has already confirmed that Bitcoin and other ‘volatile’ cryptocurrencies will not be compatible with the project.
“What is interesting to us is how you can probably create peer-to-peer lending or open up lending capabilities with different kinds of collateral. So with different ways of doing this rather than with volatile Bitcoin”.
ING’s Defi Whitepaper
Existing lending protocols like Aave allow users to borrow cryptocurrencies – such as stablecoins – by putting forward crypto as collateral. However, these loans must typically be overcollateralized if dealing in Wrapped Bitcoin (WBTC) or Ethereum (ETH) to provide a cushion against their volatile price swings. ING mentioned Aave in a whitepaper published earlier this year, praising it for its efficiency and borderlessness.
However, the bank also critiqued the protocol for not allowing the creation of new money to finance entrepreneurs and companies. Furthermore, it acknowledges that tying real-world assets to Defi remains a challenge.
Featured image courtesy of Bloomberg.