German Bank Uses Bitcoin to Transfer Loans Internationally

A German online bank, Bitbond, started offering its clients the option to transfer loans to any part of in the world with Bitcoin.

Crypto to Bypass SWIFT

By using cryptocurrencies to facilitate its transactions, Bitbond is essentially able to bypass the SWIFT international wire transfer system and lend money to its clients almost instantaneously and for a low cost.

In an interview with Reuters in Berlin, Bitbond founder Radoslav Albrecht explained the reason why he founded Bitbond.

“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.”

Of course, by using cryptocurrencies to transfer loans, therein lies the concern of the volatility of the currencies itself. To avoid this, clients will only hold on to the Bitcoins that they receive for a brief period of time, after which it will be converted back into the local currency of the country that the funds are being withdrawn in. That way, both the bank and the client will be able to avoid the fluctuating exchange rates of cryptocurrencies.

Ever since Bitbond was founded in 2013, it has been gaining massive amounts of traction amongst its clients. Albrecht’s office in Berlin’s fashionable neighborhood Prenzlauer Berg currently employs 24 people from 12 countries, and together, the crew manages loans for 100 customers amounting up to $1 million each month.

According to Albrecht, most of the customers are small business owners or freelance workers. There is also a limit to the amount of money that can be loaned to a client - $50,000. After being licensed and recognized as a bank in 2016, Bitbond has gained a lot of investors and clients since.

The rapid growth of Bitbond only goes to show the rate of adoption of Bitcoin in Germany. In fact, as seen in the map below, Germany is one of the countries that have the most Bitcoin nodes transmitting data about new transactions - second only to the U.S.

German Bank Uses Bitcoin to Transfer Loans Internationally bitbo

Source: Bitnodes

Crypto As Collateral for Loans

In the past, Bitcoin has only been used as a collateral for loans, never as a direct medium to transfer credit internationally. According to a Bloomberg report, lenders on the fringe of the financial industry have started offering loans using digital currencies such as Bitcoin and Ethereum as collateral, though it might be worth pointing out that most of these lenders are startups with names like Salt Lending, Nebeus, CoinLoan, and EthLend. On the other hand, banks and other financial institutions are hanging back at the moment, as the terms for this kind of loans can be onerous compared with traditional loans.