A worldwide banking giant is developing its own Defi initiative — but it will not include volatile cryptocurrency. ING – the Dutch multinational banking organization – has begun working with the Netherlands’ financial regulator to explore the use of decentralized finance.
Annerie Vreugdenhil, ING’s Chief Innovation Officer, stated as much earlier today at the Singapore Fintech Festival. The CIO lauded Singapore’s accommodating regulatory climate during a panel discussion. As previously reported, the Singapore Monetary Authority has no plans to ban Bitcoin. Additionally, the head of Singapore’s central bank has demonstrated an interest in stable coin innovation.
“In other locations, we work with regulator-mandated sandboxes,” Vreugdenhil explained. “We really have an initiative in Amsterdam now on Defi for peer-to-peer lending, where we are collaborating with the regulator.”
According to reports, the bank intends to conduct a sandbox test of its Defi lending project using the Authority of the Financial Markets (AFM). The AFM sandbox is a regulatory testing ground for novel financial products in the Netherlands. It enables new enterprises to innovate in the field without being burdened by government regulations.
Later, an ING spokeswoman indicated that no concrete proposal had been made for the regulator. However, the bank has previously acknowledged that the project will be incompatible with Bitcoin and other ‘volatile’ cryptocurrencies.
“What interests us is the possibility of establishing peer-to-peer lending or expanding lending capabilities with various types of collateral. Thus, use alternative methods rather than with volatile Bitcoin”.
Existing lending protocols, such as Aave, enable users to borrow cryptocurrencies – including stablecoins – in exchange for putting up crypto as collateral. However, when dealing in Wrapped Bitcoin (WBTC) or Ethereum (ETH), these loans must often be overcollateralized to protect against their erratic price swings. ING lauded Aave’s efficiency and borderlessness in a report issued earlier this year.
However, the bank criticized the protocol for prohibiting the creation of new money for the purpose of financing entrepreneurs and businesses. Additionally, it concedes that linking real-world assets to Defi continues to be difficult.
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