Divine Research Issues 30000 Unbacked Crypto Loans Using World ID 40% Default Rate Amid 20%-30% Interest

San Francisco-based lender Divine Research has issued approximately 30,000 unbacked short-term crypto loans since December 2024, leveraging OpenAI CEO Sam Altman’s iris-scanning identity verification platform, World ID. The firm targets underserved international borrowers, offering microloans under $1,000 in USDC stablecoin with interest rates ranging from 20% to 30%. Founder Diego Estevez described the platform as “microfinance on steroids,” emphasizing its accessibility to individuals like teachers and vendors who lack traditional credit access [1]. To mitigate risks, Divine employs World ID to prevent borrowers from creating multiple accounts after defaulting and issues World tokens that can be partially reclaimed if repayments fail.

The model’s default rate for first-time borrowers is reported at 40%, a figure Estevez attributes to high interest rates offsetting losses. Divine’s approach aligns with a broader trend of crypto lenders capitalizing on decentralized identity tools and political tailwinds, including support from former U.S. President Donald Trump. However, the sector remains shadowed by the 2022 collapse of major lenders like Celsius and Genesis, which left a $2 billion lawsuit in its wake.

While Divine’s strategy diverges from collateral-based lending, competitors like 3Jane and Wildcat are also experimenting with unbacked credit. 3Jane, which recently raised $5.2 million, requires income or asset verifications but no collateral, while Wildcat offers undercollateralized loans to institutional traders. These models highlight a shift toward AI-driven automation and alternative risk assessments. 3Jane, for instance, plans to deploy AI agents to enforce repayment rules and sell defaulted loans to U.S. debt collectors [1].

The use of World ID underscores Altman’s growing influence in decentralized identity solutions. By replacing traditional credit scoring with biometric verification, Divine aims to serve populations excluded from legacy systems. However, the lack of collateral exposes lenders to significant losses during downturns. Estevez claims the system is “engineered for profit,” factoring in default rates and interest returns, but the sustainability of such high-risk models remains untested.

Regulatory scrutiny looms as a key challenge. The absence of collateral and elevated interest rates could attract oversight, particularly following past crypto lending failures. Meanwhile, JPMorgan’s recent exploration of Bitcoin-backed loans signals cautious institutional interest, contrasting with Divine’s unsecured approach. Estevez’s vision hinges on balancing innovation with systemic risk, a strategy that could either disrupt financial inclusion or amplify market volatility.

Source: [1] [Divine Research Issues 30,000 Unbacked Crypto Loans Using Sam Altman's World ID] [https://cointelegraph.com/news/divine-research-issues-30000-unbacked-crypto-loans-world-id]