The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the largest network in the world enabling financial institutions to exchange formation about financial transactions. Cryptocurrencies are now taking over the business.
Bitbond Allows Small Businesses
German online bank Bitbond has announced it uses the Bitcoin’s blockchain to facilitate international transfer of fiat loans. Loans are transferred to the borrower using Bitcoin only to be converted back to fiat currency once the international movement is processed. This allows customers to avoid fluctuating exchange rates of fiat currencies.
Launched in 2013 and licensed as a financial institution in 2016, Bitbond helps small and medium-sized enterprises (SMEs) around the globe borrowing up to €50,000. According to the bank’s website, it has already lent over $10 million to 2,500 companies over the years, including lending and borrowing of loans in Bitcoin.
Employing 24 people from 12 countries, Bitbond manages loans for 100 clients amounting to around $1 million each month. The company’s motto is “see no bank, hear no bank, speak no bank” and Bitbond no longer sees any reason to use the legacy system, Radoslav Albrecht, Founder and CEO of Bitbond, told Reuters TV.
“Traditional money transfers are relatively costly due to currency exchange fees, and can take up to a few days. With Bitbond, payments work independently of where customers are. Via internet it is very, very quick and the fees are low.”
The Ripple Transaction Protocol was developed as a blockchain-based alternative to SWIFT, but many other cryptocurrencies may take its place over the long run. To transfer loans in fiat, Bitbond relies on Bitcoin, which is also costly at the moment. The Bitcoin Lightning Network could change that, however.
The same technology that will make international transfers cheaper and faster has the potential to evade capital controls, which is of use for countries sanctioned by the international community, such as North Korea and Venezuela. Iran is again being pressured by sanctions from the United States of America.
Bitcoin was used as a collateral for loans at Bitbond right from the start, but it wasn’t their original method of transferring credit in currency internationally. By using bitcoin blockchain, the German bank is able to bypass the SWIFT network, cut costs and reduce the waiting period.
The legacy system, which uses SWIFT, comes with several fees for each transaction made, including fees levied by the correspondent and recipient banks, as well as exchange rates charged by the banks.
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