German online bank, Bitbond, has announced that it will replace its current international transfer system, Swift, with Bitcoin’s blockchain. The financial institution has said that replacing its current system will make international transfers quicker and more affordable.
Bitbond already allows for the lending and repayment of Bitcoin loans, but this represents the first time that they will use the cryptocurrency’s blockchain to transfer fiat‐based funds. Once the money has transferred to the borrower’s account, it will be converted back to fiat, however, but it could represent the first steps towards more banking institutions replacing Swift. While the international transfer system is used around the globe, it does have inherent flaws. A single Swift transaction requires the payment of several fees and can take days to complete.
Ripple (XRP) was actually developed with the intention of replacing Swift transfers, and is currently the world’s third largest cryptocurrency by market cap. However, professionals and banks, some of whom have been trialling the blockchain technology behind Ripple’s system, have raised concerns over its long‐term future as a viable alternative to the existing system.
BitBond is a peer‐to‐peer lending platform. It offers loans of up to $25,000 with interest rates starting as low as 1%. With fees that are potentially much lower than traditional, high street lenders, the company needs to find the most cost‐effective way of facilitating international transfers. The company claims to have facilitated the lending of $10mn dollars to more than 2,500 businesses, including Ebay sellers and more traditional business models. Launched in 2013, BitBond became recognised as a financial institution in 2016 and connects private lenders and borrowers around the globe.
Using the new system, BitBond will take fiat from the lender, convert it to Bitcoin, transfer it to the borrower’s country, and then convert it back to fiat money before giving it to the borrower. Although the process sounds more complex, it will be quicker and cost less in transaction fees.
Although Bitcoin has gained a lot of publicity in recent years and months, it has yet to enjoy mass adoption. More and more retailers accept Bitcoin, especially in the US. Overstock was arguably the first major company to accept Bitcoin, and founder Patrick Byrne is heavily invested in blockchain technology, with the company investing in Medici Ventures, a Distributed Ledger Technology capital staking organisation. However, for the most part, organisations are deterred by the volatility of Bitcoin’s price and news reports that regularly surface about exchanges and wallets being hacked, creating fear in the technology.
Another reason for the slow uptake of Bitcoin has been the slow transaction speeds and high costs. However, the introduction of Segwit and the Lightning Network have helped greatly improve matters. Transaction fees have been cut considerably, along with the amount of time it takes for a transfer to complete.
Despite the reluctance of some organisations to face Bitcoin volatility, there are others that are making a move towards blockchain powered transactions. Reddit, the social networking site, started accepting Bitcoin in 2013 but stopped in March of this year.
However, recent reports suggest that they are to start accepting Bitcoin payments, as well as accepting Litecoin and Ethereum. Reddit has said that it stopped accepting Bitcoin because they upgraded to a new platform that wouldn’t integrate with Coinbase’s system. They have said, however, that once the system API finishes updating, they will be able to accept a host of cryptos.
A tax collector in Florida county has also said that it will accept Bitcoin for a variety of services, using the Bitpay payment processor platform. The services include payments for driving licences, automobile tags, and property tax, among other services. Tax Collector, Joel Greenberg, said that he does not envisage any price volatility to arise as a result of the payments.