What is Bitbond, and Why Should You Care?
May 14, 2018
Between transaction fees and continually changing exchange rates, transferring funds internationally can quickly become costly. Radoslav Albrecht, the founder of an online German bank called Bitbond, may have a solution to this dilemma. Bitbond is a bank which uses cryptocurrencies, such as Bitcoin, to circumnavigate the Society for Worldwde Interbank Financial Telecommunications (SWIFT) network. The SWIFT network is extensive (10,000-member institutions) and is a dominant platform for international payment transfers. Loan transfers through Bitbond, however, are faster and they are also relatively inexpensive. Though Bitcoin has been used as collateral in loans before, this is the first instance in which it has been used for international currency transfers. Here is how Bitbond works:
Clients are given loans denominated in a cryptocurrency, such as Bitcoin. The client then holds the loan for a brief period of time (seconds or minutes) until the loan can be exchanged back into the native currency of the country where the loan is being sent. Due to the relatively low holding period, the value of the cryptocurrency, from which the loan is derived, is unlikely to drastically change before it is converted into a fiat currency.
The German market is a very fertile environment for cryptocurrency businesses such as Bitbond. According to a Reuters report, Germany has the second highest number of Bitcoin nodes in the world, trailing only the US. The case of Bitbond is straightforward example of the exponentially growing utility of cryptocurrencies, and the ability of cryptos to transform established financial fields such as international banking and foreign exchange.
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