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ING’s P2P lending DeFi project set for regulatory sandbox (updated)

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ING is starting to work with the Netherlands financial regulatory AFM to potentially trial its DeFi P2P lending project as part of the AFM sandbox. That’s according to the ING”s Chief Innovation Officer, Annerie Vreugdenhil, who was talking during the Singapore Fintech Festival. The application won’t use Bitcoin or ‘volatile’ assets as collateral.

Update: After the publication of this article, a spokesperson responded to our questions stating that no detailed proposition is being discussed with the regulator because the concept is at a very early stage and “there is no concrete proposition developed yet”.

During the panel discussion, Vreugdenhil complimented Singapore’s regulatory environment, stating that, “In other places, we work with sandboxes that regulators have. We actually have in Amsterdam now an initiative on DeFi on P2P lending where we are starting to work with the regulator.”

Earlier this year, ING published a paper on Decentralized Finance (DeFi), particularly exploring the permissionless Aave peer-to-peer lending protocol. In July, it became clear that Aave was working on a permissioned lending pool targeted at institutions named Aave Arc. And in September, digital asset custodian Fireblocks, which counts BNY Mellon as one of its investors and clients, proposed acting as a ‘whitelister’ – effectively implementing compliance – for the permissioned lending protocol.

The permissionless version of Aave allows users to deposit and earn interest on stablecoins or cryptocurrencies such as wrapped Bitcoin or Ether. Typically a borrower will provide a volatile cryptocurrency as collateral and then borrow stablecoins against it for up to 85% of the cryptocurrency’s value. This happens without intermediaries.

No Bitcoin as collateral

In today’s conversation, ING’s Vreugdenhil stated ING’s solution would not support Bitcoin and hinted it might also exclude volatile cryptocurrencies. “We are looking into peer-to-peer lending in a DeFi kind of setup. But then not on Bitcoins,” stated Vreugdenhil. However, she observed that Bitcoin demonstrated that a standardized form of collateral works.

“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,” said Vreugdenhil.

Which leads to the question of what other standardized forms of assets might be offered? The obvious candidates are securities, commodities and currencies for foreign exchange. Another major project that ING is working on is Pyctor, a digital asset custody platform that targets security tokens on both public and private blockchains. 

The Pyctor project offers a decentralized solution for custody. Participants include three of the top five global custodians, State Street, Citi and BNP Paribas Securities Services (BNPPSS) as well as ABN AMRO, Invesco, Société Générale – Forge, UBS and others.

ING has significant commodity blockchain interests as well. It’s a co-founder of VAKT, the oil and gas platform, and trade finance platform Komgo. However, these are both B2B platforms and the DeFi project is targeted at retail clients because there’s “definitely an appetite for it, ” said Vreugdenhil.

“Corporates are much more critical on those kinds of things, simply because they cannot afford it. It’s not their business to be speculative.”

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