Currently, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the largest network in the world that enables banks and financial institutions to exchange formation about the financial transaction. But this seems to change as cryptocurrencies taking over the business.
German online bank Bitbond announced the use of Bitcoin’s Blockchain to service international transfer of fiat loans. In order to avoid fluctuating exchange rate of fiat currencies, the loans will be transferred to the borrower using Bitcoin and they will be converted back to fiat currency only after the process of the international movement.
Bitbond was launched in 2013 and licensed as a financial institution in 2016. Its aim is to assist SMEs companies around the world borrowing them up to € 50,000. According to the Bitbond’s official website, the bank has already lent $10 million to over 2,500 companies over its operation, including lending and borrowing loans in Bitcoin.
Its 24 employees come from 12 countries. Bitbond services loans for 100 clients amounting to $1 million each month. The company’s motto is “see no bank, hear no bank, speak no bank” and it sees no reason to use the legacy system.
Radoslav Albrecht, founder, and CEO of the company spoke to 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.”
As a Blockchain-based alternative to SWIFT was developed the Ripple Transaction Protocol. As the time passes, many other cryptocurrencies may take its place. Bitbond relies on Bitcoin which is expensive presently. However, the Bitcoin Lightning Network could change it forever.
This technology has also the potential to overcome the burden of capital controls, which have been imposed to some countries like North Korea and Venezuela. Iran is again being pressured by sanctions from the United States of America.
Bitcoin was used as collateral for loans at Bitbond already from the beginning, but it was not their original method of transferring credit in currency across the globe. The use of Bitcoin Blockchain will enable the German bank to “skip” the SWIFT network, reduce costs and waiting period.
The SWIFT legacy system comes with several fees for each of the transactions made, including fees levied by the correspondent and recipient banks and exchange rate charged by the financial institutions.