All the risks of crypto lending, cryptocurrency loans
Crypto lending, the lending of cryptocurrencies to borrowers outside of traditional finance and often insolvent, is gaining popularity in the United States. But high interest rates offset the losses, industry firms say.
Nearly three years after the bankruptcy of FTX , one of the most important cryptocurrency exchanges, the so-called "crypto winter" is over: thanks in part to the support given to the sector by US President Donald Trump, in words and deeds (the Clarity Act, the Anti-CBDC Act, and the Genius Act ). Bitcoin, the most popular cryptocurrency, is currently at record levels, and even BlackRock , the world's largest investment management firm, is recommending its clients add it to their portfolios. Meanwhile, JPMorgan, the world's largest bank by market capitalization, is considering entering the crypto lending sector.
“MICROFINANCE ON STEROIDS”
"A new generation of high-yield cryptocurrency ventures is expanding risk appetite with new forms of digital asset lending," the Financial Times wrote, referring to crypto lending . The newspaper reports how Divine Research, a San Francisco-based lending firm, has granted around 30,000 short-term, unsecured loans since December. It did so in partnership with World, the futuristic cryptocurrency (and iris-scanning online authentication) project launched by Sam Altman, best known as the CEO of OpenAi.
“It’s microfinance on steroids,” Divine founder Diego Estevez told the Financial Times .
DIVINE CRYPTOCURRENCY LOANS
Divine offers loans of less than $1,000 in the USDC stablecoin to low-income consumers, mostly living abroad and typically not served by traditional financial institutions. The loans typically carry fixed interest rates between 20 and 30 percent. To ensure that defaulting borrowers don't create a new account to apply for another loan, Divine uses the iris scanning system developed by World, which—as mentioned—is supposed to ensure online authentication.
Stablecoins are digital currencies that differ from "traditional" cryptocurrencies because they have a fixed value, usually pegged to the dollar at a 1:1 ratio.
WHAT 3JANE DOES
One of Divine's main competitors is the 3Jane group, backed (among others) by the venture capital fund Paradigm with over 5 million dollars: Paradigm was among the investors of Ftx, by the way.
3Jane provides unsecured loans in USDC stablecoin on the Ethereum platform: transactions are validated, verifiable, and permanent via the blockchain. The unusual loans are then sold to US debt collection agencies.
INTEREST RATES OFFSET LOSSES
Divine says default rates for first-time borrowers average 40 percent, but high interest rates “offset these losses.”
The company also explained that most loan applicants were not regular cryptocurrency users before registering on its platform. The crypto lending program was tested in Argentina, which for years had to contend with extremely high inflation. Divine's loans are funded by the deposits of individuals, whom Estevez describes as people seeking "good returns."
Most of Divine's borrowers were not regular cryptocurrency users before signing up. The program was piloted in Argentina, which has suffered from high inflation for years. The loans are funded by the deposits of individuals, who, according to Estevez, are typically people looking for "good returns."
Cryptocurrency lending funded by individuals was at the center of the 2022 meltdown, when platforms like Celsius failed to repay their depositors and filed for bankruptcy.
Marco Liera's comment
"They call it 'microfinance on steroids.' Lending unsecured stablecoins in $1,000 denominations to non-banked entities, 40% of which are insolvent, with interest rates between 20 and 30%. In Italy, businesses like these are usually financed by the 'Ndrangheta or the Camorra. In the US, by friendly venture capitalists , who naturally comply with ESG criteria," wrote insurance broker Marco Liera, founder of You Invest, on X.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/prestiti-criptovalute-crypto-lending/ on Sat, 02 Aug 2025 06:23:45 +0000.