Divine Research Issues 30,000 Unsecured Crypto Loans Using Biometric Verification 40% Default Rate

Divine Research, a San Francisco-based lender, has issued approximately 30,000 unsecured short-term crypto loans since December 2024, targeting overseas borrowers excluded from traditional banking systems [1]. The platform leverages OpenAI CEO Sam Altman’s World ID system, an iris-scanning biometric verification tool, to authenticate borrowers and prevent account manipulation after defaults. Loans, typically under $1,000 in USDC stablecoin, serve populations such as teachers, small business owners, and others with internet access but no formal credit history. Interest rates range between 20% and 30% annually, with a reported 40% default rate for first-time borrowers [1].

The model relies on high-interest charges and partial recovery of free World tokens distributed to borrowers to offset losses from defaults. Founder Diego Estevez describes the approach as “microfinance on steroids,” emphasizing its role in addressing credit gaps for underserved global populations [1]. Unlike conventional lenders requiring collateral, Divine uses biometric verification to ensure defaulted borrowers cannot open new accounts, mitigating repeat risk. The platform’s success hinges on balancing elevated interest rates with borrower accessibility, a strategy that mirrors broader trends in decentralized finance (DeFi) where traditional credit metrics are often unavailable.

The crypto lending sector is witnessing renewed institutional interest, with major banks like JPMorgan exploring digital asset-backed loans for high-net-worth clients as early as 2026 [1]. This shift reflects a dual-track evolution in crypto credit: uncollateralized microfinance models like Divine’s cater to low-income borrowers, while secured lending by traditional institutions targets wealthier clients. JPMorgan’s cautious approach—beginning with crypto exchange-traded fund acceptance before direct digital asset collateral—highlights lessons from earlier failures, such as Celsius and Genesis, where inadequate risk management led to collapse.

Market data indicates a recovery in crypto lending, with the sector growing from $9.6 billion in 2022 to over $39 billion currently [1]. Centralized platforms like Divine and decentralized alternatives are driving growth, supported by institutional investors participating in crypto-collateralized borrowing. However, Divine’s high default rate underscores inherent risks in unsecured lending, particularly for borrowers lacking established creditworthiness. Estevez argues that structured interest calculations and token recovery mechanisms enable profitability despite losses, though long-term sustainability will depend on regulatory acceptance and technological refinements in identity verification.

The platform’s use of World ID could influence future developments in crypto finance, especially as identity verification becomes a critical component of lending frameworks. By addressing challenges in decentralized credit, Divine’s approach may set precedents for regulatory innovation, though its reliance on biometric data raises privacy considerations. The broader industry’s ability to adapt to these challenges while maintaining user trust will determine the viability of unsecured models in expanding financial inclusion.

Source: [1] [title: Divine Research Distributes Thousands of Unsecured Digital Asset Loans] [url: https://coinmarketcap.com/community/articles/6887d58ad834536705badf0d/]