Bitbond, a German online bank, is using Bitcoin to allow international transfer of loans. It has replaced Swift(Society for Worldwide Interbank Financial Telecommunication) with Bitcoin’s blockchain so that clients will be able to transfer loans anywhere in the world using Bitcoin. Swift is a messaging platform used by banks and financial institutions to transmit information regarding monetary transactions and operations using a standard coding system.
Loans are exchanged to the borrower utilizing Bitcoin only to be converted back to fiat money once the international procedure is handled. This enables clients to abstain from fluctuating trade rates of fiat monetary forms.
Founded in 2013 and authorized as a financial organization in 2016, Bitbond helps small and medium-sized enterprises (SMEs) around the world obtaining up to €50,000. As mentioned on the bank’s website, it has just loaned over $10 million to 2,500 organizations over the years, including lending and borrowing of loans in Bitcoin. Bitbond leverages bitcoin as a technology and payment network to create the first global market for small business loans. That’s something that wouldn’t be possible in the conventional banking system because payment transactions would take too long and would be too expensive.
German businessman and founder of Bitbond Radoslav Albrecht told Reuters:
“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 created as a blockchain-based option to SWIFT, however numerous different digital currencies may have cemented their place as time goes on. To transfer loans in fiat, Bitbond depends on Bitcoin, which is additionally costly right now. The only difference is that the Bitcoin Lightning Network could change that. As of now, the vast majority of the world’s financial organizations depend on the SWIFT system to encourage international transactions but it has few weaknesses. Clients end up paying extra fees for each exchange they make through the system. These incorporate exchange expenses imposed by the correspondent and beneficiary banks, and cash trade rates charged by the banks.