An online bank based in Berlin, Germany is using bitcoin as a proxy to transfer loans internationally in a first-of-its-kind use for the original cryptocurrency.
Radoslav Albrecht, an entrepreneur based in the German capital is CEO of Bitbond, whose business model runs on allowing its clients to transfer loans to any country in the world by using bitcoin as an intermediary between two currencies. His company typically serves clients in areas of the world where financial infrastructure is lacking.
“Our mission is to make borrowing and lending globally accessible. Many markets and regions are underserved by banks. In emerging markets, bank account penetration tends to be below 50%. Without a bank account, most people are excluded from formal financial services and can neither get an affordable loan nor invest their money for interest.” says Albrecht.
Use of bitcoin as a common currency of exchange allows the company to get money to its clients with the bare minimum of financial services, leapfrogging the SWIFT international transfer system and avoiding lengthy transaction costs and time lags.
Speaking with Reuters TV, Albrecht explained, “Traditional money transfers are relatively costly due to currency exchange fees, and can take up to a few days [but] with Bitbond, payments work independently of where customers are. Via internet it is very, very quick and the fees are low.”
The process works by transferring payments into bitcoin, sending them to clients wherever they are in the world, and then transferring them back into local currencies. As the money is only converted into bitcoin for a matter of minutes, the danger posed by the volatility of the crypto market is avoided. This method of using bitcoin is the first of its kind in the financial sector.
Bitbond – despite being a relatively small operation with only 24 employees spread across 12 countries – is growing in popularity, with the total value of the loans provided each month in the region of $1million.
Clients of Bitbond are generally entrepreneurs borrowing relatively small amounts of money: no more than $50,000.
Use of cryptocurrency as a common medium of exchange between different currencies is not new, with Ripple and Stellar both being developed with similar uses in mind. However, this up-and-running use of cryptocurrency as a means to solve problems and bottlenecks in traditional financial infrastructure is certainly a boon to its reputation as a tool which can be used legitimately by non-specialist entrepreneurs.
Image Source: “Flickr”
Alex has been putting words on paper since he was old enough to hold a pen; when he bought his first bitcoin in January 2017, those words discovered their place within crypto as well. He holds a master’s degree in international relations from Leiden University in the Netherlands, and his special expertise lies in European cryptocurrency regulation.