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

Divine Research, a San Francisco-based crypto lender, has issued approximately 30,000 unbacked USDC loans since December 2024, leveraging OpenAI CEO Sam Altman’s World ID platform for borrower verification. The platform targets overseas users excluded from traditional financial systems, offering short-term loans under $1,000 in the USDC stablecoin. World ID’s iris-scanning technology prevents borrowers from opening multiple accounts after defaulting, a critical measure given the reported 40% first-loan default rate. Founder Diego Estevez described the initiative as “microfinance on steroids,” emphasizing access for individuals like “high-school teachers, fruit vendors,” and others with internet connectivity [1].

The loans, which carry interest rates between 20% and 30%, are marketed to individual lenders seeking returns in a market still reeling from the 2022 collapses of Celsius and Genesis. Estevez noted that high rates compensate for losses and that Divine issues free World tokens to borrowers, which can be reclaimed if defaults occur. Lenders are positioned as everyday investors, with the platform designed to ensure profitability even after accounting for default risks. “Anyone can provide liquidity,” Estevez stated, adding that the system’s structure guarantees returns for liquidity providers [1].

The move reflects a broader trend of high-risk crypto lenders capitalizing on renewed market momentum and political support, including from former U.S. President Donald Trump. Competitors like 3Jane and Wildcat are also expanding in the space. 3Jane, which recently raised $5.2 million from Paradigm, offers uncollateralized Ethereum-based credit lines backed by “verifiable proofs” of income or assets. It plans to deploy AI agents to automate lending rules and reduce rates, while defaulted loans are outsourced to U.S. debt collectors. Wildcat, meanwhile, caters to trading firms with undercollateralized loans and customizable terms, relying on direct lender coordination for recovery [1].

Despite the growing appetite for decentralized finance (DeFi) lending, the sector remains small and volatile. JPMorgan’s recent exploration of crypto-backed loans—planning to lend directly against Bitcoin and Ethereum—signals cautious institutional interest but highlights the lingering shadow of 2022’s failures. Divine’s approach, which avoids collateral requirements entirely, raises questions about scalability and systemic risk. Estevez acknowledged the challenges but framed the high default rate as a calculated trade-off, emphasizing that the platform’s design allows for partial recovery through token claims and ongoing borrower monitoring [1].

The use of World ID in this context marks a novel application of biometric verification in crypto finance. By integrating Altman’s iris-scanning technology, Divine aims to mitigate fraud while expanding access to unbanked populations. However, the reliance on a single verification method could pose vulnerabilities if the system is compromised. Estevez’s comments suggest confidence in the technology’s robustness, but critics may argue that uncollateralized loans inherently lack security in a market prone to volatility [1].

The broader crypto lending landscape is fragmented, with startups adopting varied strategies to balance risk and accessibility. While Divine and 3Jane focus on individual borrowers, Wildcat targets institutional clients, reflecting divergent approaches to market segmentation. The sector’s growth is further complicated by regulatory uncertainty, as seen in New Jersey’s recent legislative hearings on crypto-related bills [2]. Despite these hurdles, the entry of traditional financial players like JPMorgan indicates a potential shift toward hybrid models that blend DeFi innovation with conventional risk management [1].

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)

[2] [EarthNewspaper.com Testimony on New Jersey Crypto Bill] (https://earthnewspaper.com/)