Divine Research Issues 30K Unbacked Crypto Loans via World ID Amid 40% Default Rate 20-30% Interest Rates

Divine Research, a San Francisco-based lender, has issued approximately 30,000 uncollateralized short-term crypto loans since December, leveraging Sam Altman’s World ID, a biometric verification platform powered by iris-scanning technology. The loans, denominated in USDC stablecoin and capped at $1,000, target borrowers excluded from traditional financial systems, primarily overseas users. Founder Diego Estevez described the initiative as “microfinance on steroids,” emphasizing its focus on underserved individuals such as teachers and vendors who lack access to conventional credit [1].

The platform uses World ID to prevent account abuse by verifying users’ identities and ensuring borrowers cannot open multiple accounts after defaulting. Estevez highlighted that high interest rates (20-30%) offset a reported 40% default rate on first-time loans. Additionally, borrowers receive World tokens, which can be partially reclaimed to incentivize repayment [1]. Lenders, mostly everyday investors, are promised profits through a system designed to account for default rates and interest rates, according to Estevez [1].

Divine’s approach aligns with a broader shift in crypto lending, where startups are experimenting with uncollateralized models amid renewed market optimism and political backing. Competitors like 3Jane and Wildcat have adopted similar strategies. 3Jane, which recently raised $5.2 million, offers Ethereum-based credit lines verified through asset or income proofs, while Wildcat provides undercollateralized loans to market makers and trading firms. These firms rely on AI automation, debt collection partnerships, or direct lender coordination to manage defaults [1].

The sector’s growth is occurring against a backdrop of regulatory caution and historical precedents. The 2022 collapse of major crypto lenders like Celsius and Genesis left lasting reputational and legal scars, with Celsius’s CEO sentenced to 12 years for fraud. Meanwhile, JPMorgan Chase is reportedly exploring crypto-backed loans, signaling institutional interest in the space [1]. Estevez acknowledged the risks but emphasized Divine’s focus on high-return strategies to serve underserved markets.

Critically, Divine’s reliance on uncollateralized lending raises concerns about scalability and systemic risk. High default rates could deter liquidity providers despite projected returns, and the lack of collateral increases vulnerability during market downturns. Estevez defended the model by stating the system is engineered to guarantee lender profits after factoring in defaults and interest rates [1].

The sector’s future hinges on balancing innovation with trust, particularly in an industry still recovering from past failures. As startups push boundaries, regulatory scrutiny and operational risks will shape their ability to sustain growth.

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