The FinTech Startup Company Bitbond recently acquired its license from the Federal Financial Supervisory Authority or BaFin. This financial regulatory agency is an independent institution administered by the Federal Ministry of Finance based in Frankfurt and Bonn.
Bitbond is an international P2P (Peer to Peer) lending platform that operates in Berlin. It provides reasonably priced loans for small-scale enterprises. Bitbond uses Bitcoin so borrowers and lenders do not need bank accounts to become part of this international loan market. The company seeks to make financing and investing accessible to users worldwide. Meanwhile, BaFin was established following the enactment of Germany’s Financial Services and Integration Act of 2002. The agency supervises banks, credit companies, financial service institutions, insurance providers, stock exchanges, and brokers.
First Blockchain to Obtain License
Bitbond is the very-first financial services provider of Blockchain licensed by BaFin. This enterprise connects start-up business owners who need loans. The Bitcoin Blockchain is used for processing of payments. Bitbond allows private and institutional investors to invest in different interest rate regions. The BaFin license makes sure Bitbond is independent from banks.
The founder and chief executive officer of Bitbond (Radoslav Albrecht) commented that the license is a formal authorization allowing the company to carry out asset brokerage. On the other hand, other start-ups in the financial technology sector have to rent out regional licenses. Bitbond now has legal security in dealing with investors and global financial service providers.
Many investors provide small business loans through Bitbond with affordable interest rates. Beneficiaries come from more than 120 countries. Majority of borrowers are web-based merchants who manage shops on e-commerce sites like Amazon and eBay. Bitbond conducts credit checks based on merchants’ revenue data. Borrowers use their funds to finance working capital and inventory. Germany is one country in Europe with a clear-cut regulatory structure for Blockchain services.
Bitbond can also be described as a crowdfunding program since it provides capital for entrepreneurs through shared efforts of investors worldwide. In the case of Bitbond, entrepreneurs have the prerogative to use their loans for whatever purpose they like.
Equanimity for Institutional Investors
The BaFin license is good news for institutional investors like insurance firms; investment banks; pension funds; hedge funds; and, commercial trusts. More investors will be active once there is official recognition of Bitcoin. The process signals an increase in volume of Bitbond loans. The company has a unique business model. Bitbond’s automated technology for credit scoring is effective in assessing data points from small business proprietors and online merchants.
Financial technology experts opined that Bitcoin can turn out as the sixth biggest reserve currency globally by 2030. However, large quantities of Bitcoin must be stored by governments as well as business entities before this crypto-currency becomes a reserve currency. This is a big concern since the Bitcoin is an open-source platform and transactions are made public to consumers. At present, it will be hard for bureaucracies and private corporations to accept this amount of intelligibility. Some organizations may even see digital currencies as not appropriate for their requirements.
Here are some projections:
- 14 years from now, there will be only 20 million bitcoins circulated around the world.
- Bitcoin value is not expected to increase until 2030.
- The market ceiling of Bitcoin will be roughly $13.6 billion in 2030 based on the existing value of $680. This is a small percentage of reserve currencies such as the Canadian and Australian dollars (Cad and AUD). In other words, Bitcoin may not be a primary reserve currency.
The Blockchain and Bitcoin are only tools. There are several factors to keep in mind like the strength of the platform’s environment and t possibility that Bitcoin can offer value as well as address financial issues faced by ordinary people from different parts of the world.
Competition from Traditional Banks
Banking institutions will not probably compete with financial technology start-ups like Bitbond. Majority of large commercial banks do not see the small business loans ($50, 000 and below) as profitable. Costs of infrastructure are relatively high. Besides, the logistics are obsolete. Interest charges are too low to cover costs. On the other hand, consumer mortgages may prove to be enticing since millions of loan borrowers are looking for means to refinance current debts.
Bitbond offers its services online which means that anybody with Internet connection has the opportunity to access funds for capital. In other words, some 2 billion consumers without bank accounts are qualified to avail of Bitbond’s services. Meanwhile, an extraordinary level of investments is required of banks to offer their services to this enormous number of people. The bottom line is Bitbond is not competing with these banks and are willing to help these entrepreneurs to acquire enough capital for their fledgling businesses.