Divine Research Issues Thousands of Risky Crypto Loans Without Collateral

Divine Research Issues Thousands of Risky Crypto Loans Without Collateral

Borrowers Verified Through Sam Altman’s World ID as Startup Embraces High-Risk Microfinance

In a bold move blending crypto innovation with microfinance principles, San Francisco-based lender Divine Research has issued around 30,000 uncollateralized crypto loans since December, using OpenAI CEO Sam Altman’s World ID for borrower verification.

Divine targets borrowers who are typically excluded from traditional banking systems, with a focus on international users. The loans, under $1,000 each and denominated in USDC, are issued based on biometric verification rather than credit scores or collateral. World ID’s iris-scanning technology ensures users cannot open multiple accounts after defaulting, aiming to prevent fraud and system abuse.

“This is microfinance on steroids,” said Divine’s founder, Diego Estevez. “We’re loaning to average folks like high-school teachers and fruit vendors… basically anyone with internet access can get access to our funds.”

Default Rates at 40%—But Lenders Still Profitable

Interest rates range between 20% and 30%, with first-loan defaults reported at approximately 40%. Despite the high risk, Estevez insists lenders remain in profit due to the interest charged and Divine’s model of reclaiming some of the free World tokens given to borrowers upon issuance.

Everyday investors are welcome to provide liquidity for Divine’s loan pool. Estevez claims the model is designed so that, after factoring in interest returns and default rates, lenders still turn a profit.

“We’ve engineered the system such that after accounting for default rates and the [interest] rates on offer, providers will always make a profit,” said Estevez.

Competitors Push Similar Risk Models With Slightly Different Rules

Divine isn’t alone in the space. 3Jane, another high-risk lending platform, recently raised $5.2 million from Paradigm, offering uncollateralized credit lines on Ethereum. However, unlike Divine, 3Jane requires “verifiable proofs” of income or assets, even though no collateral is needed.

3Jane is also building AI-powered agents to automate lending oversight and enforce repayment. Defaulted loans are then sold to U.S. debt collectors, introducing a traditional finance element to the crypto-native model.

Wildcat, another crypto lending player, caters to trading firms and market makers, issuing undercollateralized loans with flexible terms. In case of default, lenders coordinate directly among themselves to seek recovery, according to adviser Evgeny Gaevoy.

Crypto Lending Rebounds Despite Shadows of 2022 Collapse

Crypto lending remains a small but rapidly growing corner of the digital asset market. The renewed interest is spurred in part by bullish momentum and favorable political signals, such as public support from former U.S. President Donald Trump.

JPMorgan Chase is reportedly exploring crypto-backed loans, planning to lend directly against Bitcoin and Ethereum holdings—an institutional move that further validates the sector.

However, memories of 2022’s lending crisis still loom. That year saw the collapse of major players like Celsius and Genesis, with Celsius CEO Alex Mashinsky sentenced to 12 years for fraud. Genesis, on the other hand, settled a $2 billion lawsuit.

Looking Ahead

As crypto markets mature, lenders like Divine are betting big on biometric identity and decentralized finance to reach the unbanked, offering a new model of microfinance—albeit one with undeniable risk.

Whether these approaches will scale sustainably—or face the same fate as their predecessors—remains to be seen.