Crypto Lending Makes a Comeback With Wave of Short-Term Loans

Three years after the “crypto winter,” digital asset lending is making a comeback.

That’s according to a report Saturday (July 26) by the Financial Times (FT), which cited the example of San Francisco lender Divine Research. That company said it has made roughly 30,000 unbacked short-term loans since December, working with OpenAI’s Sam Altman’s iris-scanning company World to identify borrowers.

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

According to the report, Divine offers loans of under $1,000 worth of Circle’s stablecoin USDC to cash-strapped borrowers, most of them and underserved by “traditional institutions,” as the company puts it.

Divine employs World’s iris-scanning technology to make sure borrowers who default on their loans cannot set up new accounts. Most loans come with fixed interest rates of between 20% and 30%, the report added.

As the report noted, crypto lending plunged in 2022 after a crash in the crypto market which led to a wave of defaults and bankruptcies, all leading up to the implosion of the FTX exchange. Then came the “crypto winter,” which persisted for nearly two years.

Since then, President Donald Trump has returned to the White House, with his pro-crypto attitude leading investors to return to the market. Bitcoin has hit record highs, and big banks are exploring crypto lending.

The FT report argued that while unsecured lending is inherently risky as there are no assets available to recoup losses for borrowers who default, crypto industry insiders say it represents a huge opportunity for their sector.

Writing about the crypto lending space last month, PYMNTS pointed to an April report from data center infrastructure and digital assets company Galaxy which estimated that the crypto lending market was at $36.5 billion at the end of 2024, including crypto collateral debt.

“That’s down significantly from a peak of more than $64.4 billion in 2021, as several lenders had gone out of business,” PYMNTS wrote.

“But in the current environment, where the runway is being built via legislation and regulatory rollbacks to bring cryptos more fully into banking, the lending activity is poised to accelerate.”

The Office of the Comptroller of the Currency issued a letter in March that revoked earlier guidelines on crypto and set the stage for banks and lenders to allow digital holdings to be part of secured lending activity.