A bitcoin start-up has launched a service that will allow people to carry out foreign exchange transactions for free, dodging the expensive commission often charged by major financial institutions.
Bitreserve, a company founded last year by CNET and salesforce.com co-founder Halsey Minor, allows people to convert bitcoin into normal currencies and precious metals. The start-up used to charge a 0.45 percent commission for bitcoin-to-dollar transactions, but has now cut its fees entirely.
The move is likely to give it an edge in the hotly contested "fintech" market where a number of companies such as U.K.-based Transferwise are contesting the currency transfer and mobile payments space.
Users of the platform will be able to make currency exchanges in eight major currencies: euros, dollars, pounds, yuan, yen, pesos, rupees, swiss francs. People will also have the ability to convert the currencies into gold, silver, platinum and palladium, depending on the market price. Bitreserve offers the mid-market rate for currencies.
"Those in society who can least afford it have to spend so much for things that are so commonplace," Anthony Watson, president and chief operating officer of Bitreserve, told CNBC by phone.
"If you look at a Mexican immigrants, they send approximately $30 billion home every year and they pay just under $3 billion for the privilege of sending that money home. That is 10 percent and that is disgusting."
Bitreserve's service comes with a catch however – you have to own bitcoin to use the service in order to make an initial deposit and then convert it to another asset. Plus, when users receive money, they can only spend it in bitcoin.
This could put it at a disadvantage to other companies that allow people to sign up with bank accounts and send money for still a small commission.
One use case of such a technology is remittances, which reached $436 billion in 2014, according to the World Bank. Since its inception in October 2014, Bitrserve has been responsible for $14.5 million worth of transactions globally, according to its website.
But not all experts agree that a free model is sustainable in the currency exchange business.
"No business that offers its services for free can do so sustainably over a long period of time without other revenue sources," Stan Stalnaker, board member of the Digital Asset Transfer Authority, a self-regulating body for digital currencies, told CNBC by email.
"The real question, in an age of free transactions, is about business models - what other products and services can Bitreserve launch that it will charge for, and how successful will that be on the back of very low cost remittances?"
Watson said the company was looking to partner with traditional financial institutions to allow people to move the money into traditional bank accounts, as well as retailers so people can buy items using regular currencies.
"We are in conversation across the world with not only banks but different financial services providers. We are talking to a myriad of companies. We don't see ourselves as a threat to banks we see ourselves as complimenting what they do," Watson, the former Nike CIO, said.
Another use of Bitreserve's technology is to store bitcoin in a stable currency like the U.S. dollar.
"A lot of people are putting money on reserve and moving it into currency and moving bitcoin into a stable form of currency. Bticoin bounces around like a jack rabbit," Watson added.
A number of companies such as Coincove and ArtaBit are offering similar services, but only allowing people to send bitcoin to converted to one currency.