Interview With Bitbond CEO About Their Global Cryptocurrency Credit System
Radoslav “Radko” Albrecht is the founder and CEO of Bitbond, the first global platform for cryptocurrency loans. Before creating Bitbond, Radko worked for Roland Berger Strategy Consultants and advised a lot of banks in Europe and Western Africa in restructuring and reorganizing situations.
Radoslav told Blockspoint how to create a global decentralized p2p business in Germany, avoiding banks and regulators. He also revealed how small enterprises can use blockchain to apply a new model of financing.
In 2018, the global funding gap in trade financing reached $1.5 trillion. It threatens to increase up to $2.4 trillion in 2025, according to the joint study of the World Economic Forum and Bain & Company. Researchers claim that introduction of blockchain technologies can eliminate up to $1 trillion of this amount through the facilitating of the capital raising process for small and medium-sized enterprises that have limited access to venture fundings.
The Bitbond model is one of the examples of how blockchain-based financing system can reach underserved sectors of the world economy.
The story of the first regulated German cryptocurrency bank raising
While I was working as a managing consultant and advisor in banks I could see that there were huge market opportunities for small business loans but they had really hard time in getting funding they needed to grow. I saw there was a global opportunity that existed in many countries. I had a goal to create a global lending platform that would allow everyone who has access to the Internet to apply for loans. While conducting researches I met a lot of challenges because the process of sending payments across borders was quite difficult and expensive. I was looking for alternative payment methods.
In 2012, one of my friends told me about bitcoin payments. I took a couple of days off only to learn about bitcoin. I was excited by its potential. I have to say it was an enlightening moment. From that moment I am sure that bitcoin is the technology that can help to build financing systems the way I envisioned it.
We founded Bitbond in 2013. Now it is the first global marketplace and platform for small business loans, which is one of the few fully regulated financial services providers that uses blockchain technology for payment processing. But the regulatory side was quite challenging in the beginning. It took us three years to get the license from the German regulator BaFin. After a two-year-long conversation, BaFin determined that our business was a regulated activity, so we got to know what kind of license we have to apply. And it took us another year to receive the license. The whole process was highly tiring. We had to provide pages and pages of answers to regulators’ questions. We received the license in 2016, and it was a great moment for all of us.
Over the last five years, we have been developing innovative credit scoring technologies based on machine learning algorithms. Our system analyzes transactions data or, for example, information from a customer's bank account. So, we built the system which could let us determine the repayment ability of the applicant. Our loans have to be repaid during some fixed period of time with installments.
After we launched Bitbond, we started using bitcoin exclusively for payment processing. But recently we have started looking for alternatives. Today, bitcoin has relatively high transaction fees which may take quite a long time to be confirmed. Right now, we are in the process of adding Stellar as a second platform and we have already tested it. We have run few loan transactions on the Stellar blockchain instead of the Bitcoin protocol. We use these protocols only as a way to transact money, as our loans are measured in dollars or euros.
The process of making business globally
Our platform is available globally, and we have funded borrowers from more than 80 countries. We are especially concentrated on serving two major regions as Europe and Africa. In Africa, we have partnered with the biggest local marketplace called Jumia which is something like a local version of Ebay or Amazon. They send online sellers to Bitbond when they need to work with capital financing. We are working primarily in Kenia but are aimed at other African countries as well.
We see what potential the internal markets have. While ultimate customers are owners of small businesses, we are looking to partner with potentially bigger companies that have wide customer bases. For them, it is an opportunity to add loan instruments to their services.
We work with third parties to be able to pay out transactions to bank accounts and mobile money accounts. We have partnered with Bit4coin who helped us convert cryptocurrency into a local currency whatever it may be. In Africa, we work with BitPesa that provides payments both in local fiat currency and cryptocurrency through bank accounts or mobile payments.
The main advantages of our blockchain-based transfer system are small fees, speed and secure transactions, no deal with borders and banks. Of course, every small business can run ICO but it takes a lot of effort, time and other resources. And some companies sometimes just need small loans during 24 hours. They do not have to run the ICO for two months. They need a quick financing based on their existing business. We are also in the preparation of the security token ICO. We will issue our own Bitbond token which will allow holders to invest into loans and create a loaning base for investing in small businesses.
Business with German industry spirit
I have to admit that regulators in Germany have changed their view. I am sure that Bitbond played a relatively big role in that. A lot of local companies contributed to that, so now regulators are more informed. Today, in order to get the license you don’t have to wait for three years as we did. I think the whole process may take a year and a half.
In 2011, German regulators published the first statement on bitcoin and other cryptocurrencies. It was relatively favorable. They said that cryptocurrency in Germany were financial instruments. It means that financial operators and companies which provide financial services related to cryptocurrencies are regulated businesses. And we know exactly what the legal environment looks like.
Germany is promoting innovations in terms of blockchain application but also at a protocol level. A lot of startups outside Germany now provide consumers with financial services, also, shaping infrastructure as well. This trend might be influenced by the German industry.
A lot of our leading producers are looking into this. I have recently made a project with Volkswagen which has been one of the biggest automobile producers in the world and today uses blockchain technology. These processes are running under the hood because consumers don’t even realize that some supply management software use these technologies. Now I see that this is going to be significant. And a lot of things depend on the German industry which has always been looking for more efficient solutions.