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German online bank uses Bitcoins to transfer loans (reuters.com)
149 points by okket 10 months ago | hide | past | web | favorite | 90 comments

The title and article body claim that they hold a bank license but as far as I can see[0] they only have a license as a financial service provider (FDI) for investment brokering (Anlagevermittlung) and proprietary trading (Eigengeschäft). In particular they are not regulated as a bank with capital requirements (CRR-Kreditinstitut) and can't do their own lending business (Kreditgeschäft).

On their website[1] they make no claim of being a bank. The text only speaks about being a "regulated financial institution" and the footer states "unbank" and "no bank". Their terms of use[2] clearly state that they are only a credit broker, don't loan themselves, and are not party of the loan contract. This is not banking and I'm not sure why Reuters uses that word so much. They don't even mention once that this company is not the lender and heavily imply they are.

[0]: in the database of the German Federal Financial Supervisory Authority: https://portal.mvp.bafin.de/database/InstInfo/institutDetail...

[1]: https://www.bitbond.com/about_us

[2]: https://www.bitbond.com/terms_of_use

So much for accuracy of Reuters. What else do they get wrong when they can't even tell when something is a bank or not?

Sad thing is these kinds of articles get translated and end up in hundreds of papers all over the world all as fact.

If you've ever read an article about something you know really well (company you work for, someone you personally know well, topic you are an expert in), I think you'll find that in most news articles there are exaggerations/questionable numbers printed all the time.

And then the Gell-Mann Amnesia kicks in!

“Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray's case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the "wet streets cause rain" stories. Paper's full of them. In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”


What is also funny is when you have an obvious spelling mishtake in a Reuters article and for that spelling mistake to be copied and pasted into many, many places.

In this way you can tell which newspapers actually have people reading what they publish and which ones can't be bothered.

I always assumed everything in reuters was written by bots.

Indeed. Thanks for the info.

As far as I know, Reuters isn't big on aiding pump-and-dump schemes but this sure looks like it.

If you look at their reviews they seem quite bad https://uk.trustpilot.com/review/www.bitbond.com

however I don't think they have a stock/coin/token to pump or dump.

> “Traditional money transfers are relatively costly due to currency exchange fees, and can take up to a few days,” Albrecht told Reuters TV in his office in Berlin’s fashionable neighborhood Prenzlauer Berg. “With Bitbond, payments work independently of where customers are. Via internet it is very, very quick and the fees are low.”

I don't see this argument as valid. When was the last time the currency of a solvent country fell more than 10% within a day? With Bitcoin this happened just yesterday. This means you lost 10% of your money during fiat -> Bitcoin -> fiat if you kept the Bitcoin for longer than 12 hours.

Edit: bitbond.com has a link to a "eBay SEO" optimizer in their website footer. I don't know how much this says about their credibility.

> "Traditional money transfers are relatively costly due to currency exchange fees, and can take up to a few days," Albrecht told Reuters TV

Giro transfers clear within minutes. This is the day-to-day mechanism that EU citizens use to pay their bills. This smacks of a US-centric analyst who does not understand the Euro market at even the most basic level.

The reality is the US is decades behind the state-of-the-art in banking and pretty much none of the issues that are relevant to US citizens are relevant anywhere else in the world. Sending money to someone else's bank account within minutes is pretty much a solved problem, for anyone who isn't living in a 70s-era cheque-based world like the US banking system.

Sending some bits between highly trusted parties within a formal banking system is not some unsolved problem that only Bitcoin can tackle.

> The reality is the US is decades behind the state-of-the-art in banking and pretty much none of the issues that are relevant to US citizens are relevant anywhere else in the world. Sending money to someone else's bank account within minutes is pretty much a solved problem, for anyone who isn't living in a 70s-era cheque-based world like the US banking system.

Can confirm. I've spent months in multiple Southern-African countires who all have chip-n-pin, instant bank transfers etc.

Namibia, Botswana, Lesotho, Mozambique, etc make the USA look like the dark ages when it comes to banking

Honestlyntheu dont make them dark ages. Usa is in dark ages of customer finances services.

I travel to europe extensively and on my trip to what most people dont even know a country name Poland, in 2012 they had near-field contact debit and credit banks. All card use them! When i gave them my swipe credit card a clerk couldnt stop but mention he hasnt seen one in probably five years. I told him within few years USA will switch to chip cards, to what he told me they had those circa 2010. I seen friend using near field card it was a tap of a card to the reader (no sliding no alignments) in literally 0.8 seconds his card got read and authorized. Within seconds with his personal settings he got text message confirming purchase. We then went to ATM cause he owned me money. I said we probably need bank for that kind of amount. He just smiled at me and withdrew $8,000 worth of local currency (PLN) from an ATM!! Just like that. Meanwhile just yesterda for mothers day Bank of America just again block my debit card “due to suspicious activity” despite the fact i been using this specific BOA ATM on my street for last five years, and was taking only $350 usd. I called up and told them few months ago i raised up limit to your max of 1,500. I was explained due to my own security thos limit is reset every 6 months.

> Giro transfers clear within minutes. This is the day-to-day mechanism that EU citizens use to pay their bills.

Not true at all. This is just starting to get implemented in the EU. Until now transfers took usually a full banking day, thus nothing happened on the weekend and holidays. Last year over easter I had a transfer between two German banks take 7 days because of that.

And international transfers are still a nightmare.

It depends entirely on your Banks peering agreement.

It generally clears within minutes if you're transferring between participating Banks. If not, the maximum amount of time they're permitted to take is exactly one business day after they've accepted your order. This acceptance is not necessarily the time you've entered the details on their website. It is often, but there are some outliers that only accept them at a specific time each day. (But still let you schedule them at all times.)

FWIW I've never seen a SEPA transfer take 'minutes'. Usually it takes around one business day.

Wow. In Argentina a transfer usually takes less than a minute. Sometimes my girlfriend texts me from the bank when she needs money, I make a transfer and in 2 minutes she has the cash in her hand.

This argument isn't really valid, because Bitcoin also goes up by 10% within a day.

That's why this bank can calculate this factor in and have a small off-set budget for daily fluctuations.

Of course, there are also weekly 30% drops, but there are also weekly 30% hikes.

Across a span of a year, all of this volatility cancels each other out.

> Across a span of a year, all of this volatility cancels each other out.

Bitcoin price was around $19k in December 2017. The price tumbled all the way down to around 7k in February, came back up to 11k, and now it is hovering at around 8k (numbers massively rounded, but you get the picture).

If we consider this span alone (~6 months), Bitcoin's value has fluctuated by more than 50%.

But if we consider a full year, things are even crazier since bitcoin was worth around 1k then.

Source: https://www.coindesk.com/price/

The above is great if you are selling bitcoin.

It is not so great if you are chained to any sort of contract (loans, phone contracts, car payments, etc).

If the contract stipulates "X bitcoin per month", your loan/rent/whatever went up 8x in one year. If you are chained to that contract for several years (phone contracts in my country are typically for 2 years), you are massively fucked.

Aren't they better off overall as long as the loss due to volatility during a transfer, plus the transaction fee, is less than the traditional transfer fee?

> When was the last time the currency of a solvent country fell more than 10% within a day?

15 January 2015: https://en.wikipedia.org/wiki/Swiss_franc#End_of_capping the EUR and USD fell more than 20% against the CHF, in a single day.

They fell against one currency (CHF), they didn't fall 10% in a general sense (e.g. against a basket of goods or currencies.)

If I sell muffins for USD$1 and I raise my price to USD$2, it would be a real stretch to say the USD fell by 50%.

They mention that they are immediately exchanged into their national currency. They would be exposed to the price fluctuation for half an hour maximum. Block confirmation is around 10 minutes, and you need to wait 2-3 blocks to be certain. Of course a lot of things can happend to the price in half an hour, but that's another story.

> Of course a lot of things can happend to the price in half an hour, but that's another story.

Isn't that exactly the story?

swiss frank appreciated against euro 30% in a day a few years ago


GBP on June 23rd, 2016

Doesn't it just prove the parent's point? When the pound fell by 10%, everyone remembers the specific date; Bitcoin fluctuates every few days by that much, and no one cares. I certainly my wouldn't use Bitcoin for anything important.

> “Traditional money transfers are relatively costly due to currency exchange fees, and can take up to a few days”

I would like to see some worked examples here that take into account local Bitcoin pricing and the time taken to withdraw from exchanges, vs Western Union and other commercial “Send Money” organisations. The space is intensely competitive, so I suspect the margin consumers pay if they do a minimum of research is tiny, so I’m skeptical that Magic Bitcoin Magic is somehow making this better.

Transferwise is quite cheap. I haven't been able to change bitcoins efficiently to many currencies. Euros and usd are the main ones. I'd say transferwise is probably quicker and cheaper but you never know. The actual btc-fiat exchange can be very cheap if you are a 'maker' in the market.

Dont use transferwise or worldfirst. Both have very bad reputation of closing down accounts adn freezing money. Just google both you come up with frustrated customers from literally hours ago. . I had nightmare scenario when needed to pay 120,000 eur to a contractor in England. They blocked the account for 30 days and made company almost go flop. We were forced to open extra credit line not to go bankrupt. Transferwise is a new trick of old dog PayPal (most hated company in the world) founder Peter Thiel. Same tricks just a different company name. Lookup Transferwise twitter they have people complaining constantly.

For European currencies (I use GBP, EUR, DKK, SEK) I find Transferwise to transfer within 5 minutes.

That's reasonable, as banks in those places usually support very fast local transfers, and that's what Transferwise is doing. A bitcoin exchange could meet this speed, but won't be able to beat it.

Most cryptos are faster than any type of wire transfer except card payments.

I transferred some money on Thursday from one uk bank account to another at another institution. Took less time than to log on to the second bank to confirm it had gone through.

Very US-centric. Elsewhere in the world "wire transfers" - transferring money from one bank to another happens more or less instantly.

When I pay myself from my business account and it happens just about instantly. Max I've ever waited was like 15 minutes.

Using Transferwise, a friend from Australia paid me back in the UK and it went through in like 1 hour.

Isn't Transferwise basically just using their accounts in both banks to achieve that, and rebalancing them later (if necessary)? That's not really representative of the performance of the banking system, is it?

For the international part, yes, but still the Me > transferwise and transferwise > friend transfers are "wire transfers" and both of them happen fast enough for the whole transaction to be completed in just a few hours.

Not necessarily, in Europe.

Many electronic bank transfers are approximately instant.

Sure, if you don’t factor in the conversion to and from money that can be used to buy groceries and petrol.

Providing liquidity (placing a non-marketable limit order and waiting for it to get matched) doesn't necessarily save you the spread. Your order is more likely to execute if the price moves against you, so the adverse election hurts. Market microstructure is tricky...

Time and fees from exchanges. Some routes work out OK, some not so great. Often the problem is liquidity in local markets. Even for small amounts. What look like arbitrage opportunities are really information about money movement inefficiencies.

In my country the spreed to exchange eur or usd to local current is huge, you lose at least 10%

I use transferwise all the time for usd to eur.

The loss is closer to 1%. E.g. 1k usd costs $10 to transfer at the googled exchange rate.

Better solutions are out there. Bitcoin is, as always, a solution looking for a problem.

I have used TransferWise, and yes, <1%; however https://revolut.com/ have recently added virtual bank accounts, and currently add no fee for market rate transfers.

i recently used transferwise to convert a bunch of money and it seemed like all in the fees were closer to 0.1% than 1%. I think if you do larger sums of money the fees get cheaper though because the cost to transfer into transferwise is around $20 or something for ACH pull, but the fees for the currency exchange is a slightly worse exchange rate (though still much better than you would get at a bank)

Transferwise is good but its network goal is to make money out of the transfers. Cryptos network doesnt share this goal

Great that all those exchanges aren't charging any fees and there's no transaction cost for Bitcoin...

I recently did a lot of EUR-USD transfers and have evaluated several options. I came to the same conclusion as other posters here: Services like Transferwise and Currencyfair are all very cheap, and do the job well and without risk.

Going through Bitcoin was not even close to competitive.

Did you at least google Transferwise to see all horror stories of people getting their wires frozen? Really curious of your definition of “without risk”

By that I mean that they are registered and regulated within the EU and other countries they operate in. The people operating the service are known and comply with applicable regulation, so that I can be reasonably confident nothing shady is going on and that I can get legal recourse in case something is wrong.

And no, despite doing some research on Transferwise before using them I didn't run into horror stories of them freezing wires. Transferwise has always been very professional and helpful in interactions with me (more so than my own bank).

Have you ever transferred 120,000 EUR with them, or - you know - any serious amount?

My transfers were in the 1k-10k range, I guess that's not "serious" for you.

But no, if I were putting such a big amount of money in their hands at once I would certainly do more research and look for better safeguarding.

Its not a matter if its serious to me. If i see quarter on the street I pick it up because money is money.

Unfortunately all those money-wire services are registered in UK and UK has the most strict KYC rules I think ever existed in free commerce. If you start sending bigger amounts they will shut you down, no matter how much due diligence you provide they just scared of repercussions, just in case.

> Cryptos network doesnt share this goal

Of course they do. There is an inherent transaction fee built into networks like Bitcoin, plus the fees exchanges charge.

Miners don't get paid anymore?

Thanks for the data point! What’s the spread between BTC and your local currency vs BTC/USD? Is Bitcoin legal in your country? Are there reliable exchanges? What’s the cash-out wait? Thanks in advance!

I went to a meetup once where Radoslav presented Bitbond. Referring to it as a bank is quite a stretch.

If it's registered as a bank, it's a bank. As long as you get all the usual regulation and protection, why wouldn't you think it's a bank?

In fact, it’s not registered as a bank. It’s registered as a financial services company: https://www.crowdfundinsider.com/2016/10/91093-brief-german-...

In addition, it’d be quite weird if a random startup can get a banking license just like this. Consider N26, the Berlin-based fintech “bank” and unicorn took years and just got theirs some months ago.

The article says: "In 2016, Bitbond was officially licensed as a bank and has gained many investors since." Maybe the article is wrong then.

It is.

> why wouldn't you think it's a bank?

The Bitbond site says “See no bank. Hear no bank. Speak no bank.”

Why would two currency exchanges (say USD->BTC then BTC->EUR) ever be cheaper than one (USD->EUR) ? There’s nothing special about Bitcoin that means it will have lower spreads than other FX exchanges.

I don't think real issue here are the currency exchange fees, but the transfer fees charged by banks and the logistics related to doing bank-to-bank cross-border payments.

When transferring via Bitcoin, you only to get the recipients Bitcoin address and that is. Do a bank transfer to another side of the world and you need to find out bunch of information for the recipient (their bank details, probably address etc). There's also a chance you will get some of this wrong and then there will be a manual hassle to sort things out.

> There's also a chance you will get some of this wrong and then there will be a manual hassle to sort things out.

Good thing for bitcoin if you fuck up the address your transaction and all its money goes right off into the ether.

That's why Bitcoin addresses have a checksum.

How are they avoiding these charges? The customer isn't requesting bitcoin, so you still need to transfer the money from the recipient exchange into their 'fiat' account...

Bitbond seems to be dealing just with Bitcoins, at least that's how their terms of use put it:

"We broker bitcoin loans between marketplace participants ('users'), who want to use bitcoins for a specific time period and pay interest ('borrowers') and marketplace participants who want to lend bitcoins to other people for interest ('lenders')"[1]

So then it is up to the recipient to do the exchange for fiat - if they require that. Based on the website Bitbond seems to be targeting for example people selling stuff online so it might be some of their customers can directly pay for their suppliers in bitcoins.

Even if there would be full fiat-bitcoin-fiat cycle involved, that may be easier and cheaper than doing a cross-border payment via traditional banks. The cross-border payment thing via banks is complicated and has multiple steps. Small banks don't usually have direct relationships between each other, instead there are larger banks involved in the middle to facilitate the payments. With fiat-bitcoin-fiat you might be dealing with local players on both ends, which makes things easier.

[1] https://www.bitbond.com/terms_of_use

This is obvious... once you establish trust from Bank A to Bank B (and correspondingly Bitcoin account A and B), you can transfer the money very quickly with 100% assurance it was transferred to A and B.

The older way of doing this would be based on expensive contracts, legal regulation, and potentially intermediaries, who will happily take their own cut.

The only intermediaries being added are the bitcoin exchanges. The loan originator has to initiate a bank transfer from their account into bitcoin exchange 1, and from bitcoin exchange 2 into the customer's account. That's now two 'legacy banking transfers' instead of the normal 1. More intermediaries, more transfers, more costs (and more risk of money loss unless there is a similar amount of regulation & contracts in both cases).

Not quite right. The old way of doing it actually worked like this: Bank A in country X transfers money mega-bank B in country X. Mega-bank B transfers money to mega-bank C in country Y. Mega-bank C in country Y then transfers it regional bank D in country Y.

Bitcoin will allow smaller banks to transfer money without the help of the giant banks who have built up relationships (and binding legal agreements) over the years.

Honestly, even though some large banks bullish on bitcoin, the real benefit will accrue to the smaller institutions.

It's the transfer time and fees between non SEPA countries that's cheaper and much faster. And that includes fiat->BTC->fiat commissions and tx fees.

Currency exchangers work by having pools of money in many currencies and countries, so if you want to exchange USD to GBP, they add your money to their USD pool, and take out the same amount out of their GBP pool. How fast can you do it? Probably as fast as sending an data packet to the UK. I don't see why bitcoin has to be used, well maybe if the exchange doesn't have a lot of capital and is buying BTC with the USD and selling it for GBP.

The issue is with transmitting money in another country. That's what takes several days (from Germany to USA for example). They buy BTC in Germany for EUR, send them to the guy in USA who then sells those for USD. It probably takes less than 5 minutes the whole operation.

Read the comment again.

Exchanges like Transferwise work by not actually transferring your money internationally. Once Transferwise receives my money in their UK account, they just instantly transfer the money from their Aus account to the recipient. It doesn't take several days because my money never actually went overseas

I've been a client for multiple years and have taken heavy losses on the loans I have handed out

What made you staying a client then?

you can't just exit existing credit contracts. these aren't bonds that could be traded.

They are using the banks of the bitcoin exchanges.

As a swift alternative that's fine, but you can't avoid banks if you're using country denominations.

Interesting. This is the sort of transaction that altcoins like Ripple and Stellar try to facilitate, though in a more centralised way. I wonder if Bitcoin's popularity will overcome its speed limitations in this instance.

Bitcoin's lightning network is currently maturing (it allows instant free transfer of Bitcoins off-chain). That should work perfectly for banks, given that unlike regular customers, banks don't transfer money only in one direction, so the lightning channels should stay balanced for much longer.

LN, aside from being complete vaporware, is most certainly not free. Or, it’s as free as bitcoin was promised to be “free”, in that it isn’t free at all.

Not to mention that, should it ever prove to work at any reasonable scale, LN is basically adding a layer on top of Bitcoin that gives up almost all of the things that were supposed to be core values.

Nevermind LN, regular tx fees are virtually zero at the moment.


> That should work perfectly for banks

Is the price of interbank transfers / clearing really a big deal for banks?

> instant free transfer

Who offers free transfers permanently?

Iota, Skycoin, Nano. The first 2 also offer linear/near infinite scalability, that is, the more nodes in the network, the more TPS can be handled by the network.

That's why one of the first 2 will probably replace Bitcoin until the end of 2018.

Iota isn't much more than a whitepaper and a centralised PoC. Supposedly they're supposed to roll out the real thing eventually but given their track record and how they've responded to criticism in the past I'm pretty skeptical.

I'm also very skeptical of Skycoin and their "web-of-trust" which is even more experimental than "proof of stake" which is itself rather unproven at this point.

Reading through the whitepaper I also feel like Skycoin has an issue that's shared with many newer cryptocurrencies trying to break through (including IOTA) which is to attempt to do way too much stuff at once. It's just just "web-of-trust", it's also "skywire meshnet", "fiber application ecosystem", "Skyminers custom-built hardware VPN" etc... In an effort to differentiate themselves they just pile the features on top of each other instead of focusing on doing one thing right. At least they don't use ternary I suppose.

It seems like a very wild bet to me (even by cryptocurrency standards) than either of them are going to manage to replace Bitcoin by the end of the year. After all, what drives adoption at this point is mainly speculation, not the features otherwise Bitcoin would've been replaced long ago.

Well all new coins are proof of concept before they gain adoption, so this isn't really an argument why a technology is bad.

Skycoin's consensus algorithm is among the few that are peer-reviewed next to Cardano, so i think that's as much credibility as you can get as a new coin.

Iota's coordinator is expected to be decentralised and then removed next year already.

In order to gain control of the network, you would need to gain 34% of the hash power, omnipresence in the network and omnipotence. I'm not sure what the cost of this is, but there is currently no more secure decentralized network design that I know of.

Keep in mind that 45% of Bitcoin's hash power is currently controlled by one company, Bitmain, and they are investors in the 3rd biggest mining pool, totalling 75% hashing power of the entire Bitcoin blockchain.

I mean, even bitcoin is still just a proof of concept. A wider-adopted proof of concept.

> That's why one of the first 2 will probably replace Bitcoin until the end of 2018.

It may be time to evaluate if you, yourself, are the mark.

I asked in context of the original post about free Bitcoin transfers on LN. The options you mentioned may be free, but are not Bitcoin LN.

I meant that when banks open direct lightning channels between each other they can transfer bitcoins without any fees (because there are no intermediate nodes to pay).

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