In a bold move that could reshape the landscape of cryptocurrency lending, San Francisco-based startup Divine Research is setting a new precedent by offering unsecured loans to borrowers worldwide—all validated through an innovative iris scan. This revolutionary approach, which relies on biometric data rather than traditional identification methods, has already resulted in the issuance of approximately 30,000 short-term loans since December, as reported by the Financial Times. With amounts typically falling under $1,000, these loans are distributed in USDC, a stablecoin that is pegged to the US dollar and issued by Circle, making them a practical option for those in need.
But why does this initiative matter? Well, Divine is targeting a crucial demographic—underserved individuals in developing economies who often find themselves shut out from traditional banking systems. As founder Diego Estevez puts it, “We’re loaning to average folks like high-school teachers, fruit vendors… basically anyone with access to the internet.” It’s a new kind of microfinance—one that the company cheekily refers to as “on steroids.”
🧠 At the heart of Divine’s model is the World ID, a cutting-edge identity platform developed by Worldcoin, co-founded by Sam Altman, the CEO of OpenAI. Every borrower must verify their identity by scanning their iris through a specialized orb. This high-tech solution not only enhances security but also minimizes the risk of defaults by preventing individuals from creating multiple accounts to take out multiple loans. Yet, despite these safeguards, Estevez candidly admits that around 40% of first-time borrowers do default. To combat this, the company applies fixed interest rates ranging from 20% to 30% and offers recoverable Worldcoin tokens to cover potential losses.
🚀 The concept is currently being piloted in Argentina, a nation struggling with rampant inflation where stable, dollar-backed credit options are especially appealing. Interestingly, most borrowers are newcomers to the cryptocurrency world, which adds another layer of intrigue to the venture. To bolster liquidity, Divine sources funds from individual depositors attracted by the promise of high returns. Estevez notes, “We’ve engineered the system such that after accounting for default rates and the [interest] rates on offer, providers will always make a profit.”
🔥 Divine’s emergence comes against the backdrop of the crypto lending scene slowly rebounding after a major crash in 2022, which decimated many established platforms like Celsius and Genesis. At the height of the market turmoil, these companies struggled to return deposits as token prices plummeted and default rates surged. Notably, Celsius’s CEO Alex Mashinsky faced a 12-year prison sentence, while Genesis settled a staggering $2 billion to address investor fraud allegations. As the crypto sector attempts to regain its footing, Divine stands out with its unique strategy and biometric verification.
As the demand for unsecured crypto lending grows, other industry players are also dipping their toes in similar waters. For instance, the platform 3Jane, backed by Paradigm, is offering uncollateralized USDC loans on the Ethereum network, requiring only proof of bank or crypto assets without demanding collateral.
While this niche segment of unsecured lending is capturing attention, traditional lending via collateral remains dominant, with big players like Coinbase and Tether leading the charge. Meanwhile, Wall Street is tentatively exploring this realm—firms like Cantor Fitzgerald have begun launching financing arms backed by bitcoin, illustrating the cautious yet growing interest from traditional finance.
In the end, Divine’s pioneering approach, combining biometric verification with an eye towards serving small-scale, global borrowers, poses an intriguing question for the future of unsecured crypto loans. Can the blend of advanced technology and financial access provide a viable path forward in an industry still grappling with memories of its tumultuous past? As the sector evolves, only time will tell.
As readers, how do you view the efforts of companies like Divine Research? Are you optimistic about the future of unsecured crypto lending? Let us know in the comments below!