In a presentation made during the Singapore Fintech Festival, Annerie Vreugdenhil, chief innovation officer of ING, announced the firm is working on a trial of its decentralized finance, or DeFi, peer-to-peer lending protocol with the Netherlands Authority for the Financial Markets. Vreugdenhil said the following in regards to the development, as reported by Ledger Insights:
We are looking into peer-to-peer lending in a DeFi kind of setup. But then not on Bitcoins. 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 is a Dutch financial service multinational with over $1 trillion in total managed assets. In a white paper published earlier this year, ING specifically mentioned lending protocol Aave, which is built on the Ethereum (ETH) blockchain, as one recent innovation in the industry. Through smart contracts, Aave enables borrowers to deposit crypto as collateral and take out a stablecoin loan.
The mechanism can be used as a traditional asset loan, i.e., take out debt to pay for everyday expenses while one's investment continues to compound. In line with ING's concerns about using volatile assets as collateral, Aave also enables the borrowing and lending of stablecoins. At the time of writing, borrowers can earn approximately 3% interest per annum by depositing their DAI into variable-rate pools while lenders pay 4% interest per annum and vice versa.
While ING praises DeFi for its borderless payments, 24/7 operations and speed of transactions, its white paper pointed out several drawbacks. In particular, since borrowing and lending protocols require collateral, they do not enable the creation of new money for initiatives such as financing companies and entrepreneurs.
Nevertheless, ING has taken a keen interest in the blockchain industry in recent years. At the end of 2020, ING joined the Blockchain Education Alliance. The firm also began working on digital asset custody in 2021 and discussed a number of stablecoin developments during a conference in April of this year.