Rapid crypto microloan growth Crypto microloans are experiencing a sudden surge, thanks to increased digital asset prices and a revival of investor interest due to U.S. President Donald Trump’s crypto-friendly policies.
New entrants are returning to the industry through fresh, uncollateralized lending systems, with a tech-driven solution focused on underserved lenders.
New startups embrace uncollateralized microloans
San Francisco-based Divine Research is at the forefront of the latest trend, with more than 30,000 uncollateralized microloans already distributed since December. The firm issues loans in the USDC stablecoin of Circle and focuses on borrowers who do not have access to traditional lending. Divine verifies a person via a biometric provided through Worldcoin, the iris-scanning identity initiative led by OpenAI CEO Sam Altman. After using the iris scans to determine who the users are, they cannot create multiple profiles by default.
Their model was what their founder, Diego Estevez, called microfinance on steroids. The platform offers small loans below a thousand dollars to anyone, including teachers and small-time sellers. Though the default rate has been high at 40 percent of initial loans to the company, its interest rates of 20 and 30 percent, as well as partial token recovery, have made it profitable. Money is deposited by individual depositors who want stable returns, which necessitates the loans.
Crypto credit startups expand with AI and smart contracts
Other firms are also entering the market with alternative risk models. 3Jane, a venture financed by Paradigm, recently raised a seed round of capital funding of $5.2 million. However, 3Jane needs verifiable financial records rather than biometric identity like Divine’s. It helps carry out its loans via Ethereum smart contracts and is denominated in USDC.
The company sells defaulted loans to debt collectors in the U.S and develops AI agents that can automatically enforce loan terms. The agents are willing to relieve the operational expenses and increase the avenues of credit lines. At the same time, Wildcat targets institutional originators and originates to those originators, like crypto trading companies and market makers, with custom undercollateralized lending.
Wildcat has already sourced more than 170 million dollars of loans on its Ethereum platform. It gives the borrower the flexibility to set conditions, such as maturity and loan amounts, whereas lenders combine to take action in a default case. Wildcat adviser and Wintermute CEO Evgeny Gaevoy believes that reputation and transparency are emerging as a new measure of trust in lending.
Traditional finance and crypto markets align
Digital lending is again attracting Wall Street’s interest. Recently, Cantor Fitzgerald initiated a lending business that has been focusing on Bitcoin to the tune of USD 2 billion. It is also reported that JPMorgan is working on a crypto-backed loan product. The first test performed by Coinbase with OpenAI is on AI agents capable of operating wallets and loans independently.
Even though there have been failed ventures in the industry before, this is no longer the case as these changes are being witnessed. The new entrants believe that identity verification, blockchain, and AI can regain trust in crypto credit.
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