Using Bitcoin to Handle International Loans
The Bank Guarantees Profitable Bitcoin Lending
Bitbond, an online bank founded in Germany in 2013 by German Radoslav Albrecht, has found an innovative use case for bitcoin’s borderless nature: international loan payments. According to Reuters, the service allows small scale businesses that sell their products online to borrow up to € 50,000.
If the statistics on the Bitbond website are to be believed, the bank has already lent more than $10 million to 2,500 businesses.
This bank was the first to use bitcoin to transfer credit in currency internationally, not only as loan collateral, and it’s currently processing about $1 million in loan payments per month.
Bitbond uses cryptocurrencies like Bitcoin to bypass the Swift international transfer system to lend money across the globe rapidly and at low cost.
“Traditional money transfers are relatively costly due to currency exchange fees, and can take up to a few days,” Albrecht said. “With Bitbond, payments work independently of where customers are. Via internet it is very, very quick and the fees are low.” The downside, according to Albrecht, is the coin’s volatility.
Currently, most of the world’s banking institutions rely on the SWIFT network to facilitate international transactions, but that comes with several shortcomings.
Users end up paying several fees for each transaction they make through the network. These include transaction fees levied by the correspondent and recipient banks, and currency exchange rates charged by the banks.
It is also worth noting that SWIFT doesn’t enable the transfer of money, but only allows secure communication about payment orders between the banks.
On their website they are claiming that by innovating in the fields of payments and credit scoring, Bitbond makes financial inclusion a reality around the world. All payment transactions on Bitbond are conducted via the bitcoin blockchain.
“Peer-to-peer bitcoin lending gives individual investors access profitable interest rates. At the same time borrowers get small business loans quickly and in an uncomplicated way. 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.”
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A lot of companies are still unsure about accepting bitcoin as payment because of its wildly shifting exchange rates. Bitbond avoids this issue because clients only posses the tokens for their loans for a few seconds or minutes until it’s ready to be exchanged to the national currency that they prefer.
Germany was always global forerunner in Bitcoin adoption and along with the United States, is open to crypto-related businesses.
Interest rates are, by their words, hovering around the 20% mark and they say they are aiming to achieve an internal rate of return of around 13% for all investors. If a client is located in the SEPA region, he can use Bitbond to buy his bitcoins at “unbeatable rates.” However, if the client lives outside of the SEPA region, he will be able to buy bitcoins through Coinbase or another bitcoin exchange of his choosing.
“With a currency not bound to any region, entrepreneurs around the world can shape their entrepreneurial vision, hereby strengthening their local economy and building a better future for their families and communities. Small companies hold the advantage of knowing exactly what kind of product or business their region needs and therefore manage to find profitable niches quickly and efficiently.”
“The AutoInvest tool lets you invest globally and build a portfolio in no time. It allows you to careful filter out those borrowers you want to support and those you do not, by determining location, credit risk, loan term and loan denomination. If you like to get into the Bitcoin lending process on a more personal level, you get to choose which types of businesses and entrepreneurs you’d like to invest in, or what region you’d like to strengthen by supporting local small business owners. At interest rates of around 20% and an expected return rate of 13%, Bitcoin lending will allow you to earn high profits at practically no effort at all.”