"Cryptocurrency cash loans" reignite in the crypto circle, "20%-30% interest rate, 40% first loan default rate"

A new generation of digital asset institutions is increasing their risk exposure and launching new forms of cryptocurrency lending business, driven by the soaring prices of digital assets.

Benefiting from the surge in Bitcoin prices and Trump's support for digital assets, the cryptocurrency market is gradually recovering, returning to a scale of tens of billions of dollars, with investors flocking back to the market.

San Francisco lending institution Divine Research stated that it has issued approximately 30,000 unsecured short-term loans since December. The company's founder, Diego Estevez, referred to this model as "enhanced microcredit."

Similar startups like 3Jane and Wildcat are also expanding unsecured credit lines, attracting venture capital investments. 3Jane secured $5.2 million in seed funding from venture capital firm Paradigm in June and is currently offering unsecured USDC credit lines on the Ethereum blockchain.

New Lenders Emerge, Targeting Unsecured Microloans

Diego Estevez explained that Divine Research offers loans of less than $1,000 in USDC stablecoins to cash-strapped consumers overseas, with interest rates fixed between 20% and 30%, and uses the iris scanning system of OpenAI founder Altman to ensure that defaulting borrowers cannot reopen accounts.

According to Estevez, Divine's borrowers include ordinary people such as high school teachers and fruit vendors who are "not covered by traditional financial institutions." The default rate for first-time loans is about 40%, but the company compensates for these losses through high interest rates while only recovering "part" of the free tokens issued to users.

Media reports indicate that Divine is piloting in inflation-stricken Argentina, where borrowers are mostly cryptocurrency novices, reflecting that crypto lenders are leveraging blockchain transparency to expand into emerging markets.

3Jane, on the other hand, requires borrowers to provide "verifiable proof" of cryptocurrency, bank assets, or future cash flows to support loans, but does not require any collateral to be handed over.

Technological Innovations Accelerate the Implementation of Credit Products

Reports indicate that 3Jane is developing a new lending platform involving AI agents that can execute tasks based on user instructions. The company stated that these agents will "be programmatically obligated to follow the terms of the debt," allowing them to lend "at lower interest rates."

According to a March announcement from Coinbase, the exchange has partnered with Altman's OpenAI to create AI agents equipped with cryptocurrency wallets to enhance business functionality. Defaulted loans will be sold to U.S. collection agencies, aimed at mitigating unsecured risks, but industry insiders say that while the permanent record of blockchain enhances transparency, enforcement challenges still limit its appeal.

Another protocol called Wildcat is designed specifically for market makers and cryptocurrency trading firms, offering "highly customizable, fixed-rate, low-collateral credit tools." The platform has lent approximately $170 million to date.

Evgeny Gaevoy, CEO of crypto market maker Wintermute and advisor to Wildcat, stated that borrowers can specify interest rates, maturity dates, and maximum loan capacities, "and in the event of default, lenders will coordinate directly to seek recourse."

Lessons from the Past

Cryptocurrency lending suffered a heavy blow in 2022, when the decline in digital asset prices triggered a series of defaults and bankruptcies, ultimately leading to the collapse of the FTX exchange.

The core of the 2022 crash was indeed cryptocurrency lending supported by personal funds.

At that time, lenders such as Celsius and Genesis were unable to repay depositor funds and filed for bankruptcy. Celsius CEO Alex Mashinsky was sentenced to 12 years in prison for fraud and market manipulation; Genesis agreed to pay $2 billion in settlement fees to resolve a lawsuit filed by the New York Attorney General accusing it of deceiving over 230,000 investors.

Now, the record high of Bitcoin and Trump's support for digital assets have attracted a significant influx of funds.

Traditional institutions, including JP Morgan, are also considering lending against clients' cryptocurrency holdings. Cantor Fitzgerald launched a $2 billion Bitcoin financing plan this month, providing leverage to investors holding coins.

Currently, unsecured loans still account for only a small portion of the multi-billion dollar cryptocurrency lending market, which is primarily dominated by institutions such as Coinbase, Tether, and Galaxy.