Bitbond Drops SWIFT In Favor Of Bitcoin International Transfers
Bitbond, a German online bank has broken new ground by starting to use bitcoin for international fund transfers instead of going through the SWIFT network like normal banks. Using this service allows small online enterprises to borrow up to €50,000. This service has turned out to be quite popular with businesses in the country. The bank has already lent 2,500 businesses an equivalent of more than $10 million.
Bitbond first launched operations in 2013 and went on to receive its German license that recognized the company as a financial institute in 2016. The bank’s main purpose has been to give out loans in bitcoin.
The process is pretty simple. The borrower will receive their loan via bitcoin’s blockchain network, which will be converted into the borrower’s local currency as soon as the transaction is done.
In a statement, Radoslav Albrecht, found of Bitbond, said
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.
By using bitcoin as the currency for the loan transfer, these transactions will be carried out quicker and cheaper than the current method which relies on the SWIFT network. SWIFT is popular with banks and financial institutions across the world even though the SWIFT network has a few issues.
SWIFT Could Be Replaced By Blockchain Technology
The main issue with SWIFT is that users end up paying high fees for all of their transactions on the network. This includes fees by both the banks involved, as well as currency exchange rates. What must also be highlighted is that SWIFT does not actually transfer money, but only allows for secure communication between two banks about their payment orders.
Back when it was first introduced, SWIFT was a revolutionary approach in transferring money. The network uses Bank Identified Codes (BICs), which people now call as SWIFT codes, to ensure that transfers are secure and faster.
Blockchain technology is the next step up for such transactions. The Ripple Transaction Protocol is an excellent example of this. Ripple, the world’s third largest cryptocurrency uses this method and originally developed as an alternative to the SWIFT network. The two main advantages of using cryptocurrencies for international transactions is that it can be done in a manner of seconds and has very low transaction fees.
Now that Bitbond has paved the way, it will not be long before other banks and financial institutions follow a similar path.