The ISO 20022 standard is set to replace SWIFT in the financial ecosystem on a global scale. Several cryptocurrencies, including XRP, HBAR, XLM, and ADA, have now become compliant with this standard. The digital currency industry is experiencing significant evolution, with a new trend emerging in the form of compliance with the International Organization for Standardization’s (ISO) 20022 provisions. ISO 20022 is considered the future of the financial services sector, as it aims to replace the outdated SWIFT messaging system that is currently used by most banks.
The ISO 20022 standard was developed by the International Organization for Standardization based in Geneva. It is designed to align the operational objectives of various industries, particularly the financial sector. The adoption of ISO 20022 helps ensure quality and safety, prioritize environmental consciousness, improve trade practices, and enhance interoperability between connected businesses.
For cryptocurrency protocols, embracing ISO 20022 is crucial as it brings them on par with other currencies used by banks. Through this standard, compliant cryptos are assigned an ISO number or code in the form of Digital Token Identifiers (DTI). This allows for easy differentiation between transactions conducted through different protocols, such as Bitcoin (BTC) and Bitcoin SV (BSV). It also simplifies the assessment of these protocols’ compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
Leading the way in embracing ISO 20022 are cryptocurrencies like Ripple (XRP), Cardano (ADA), Hedera (HBAR), and Stellar (XLM). These protocols possess common features that make them ideal candidates for ISO 20022 compliance. One such feature is their alignment with Proof-of-Stake (PoS) or similar consensus mechanisms, which require less energy for transaction processing and contribute to environmental conservation. Additionally, their interoperability nature makes them well-suited for the diverse interactions among entities in the financial ecosystem. These protocols are also at the forefront of payment technology innovation, with XRP playing a major role in Ripple’s cross-border payment solutions.
These ISO 20022-compliant digital currencies are bringing innovation to the financial world through Decentralized Finance (DeFi) and the tokenization of Real World Assets (RWAs). In addition to streamlining cross-border payments and enhancing regulatory standards and data security, their integration into the financial world will have significant benefits.
The question remains whether central banks will embrace ISO 20022-compliant cryptocurrencies. Historically, central banks have been skeptical of cryptocurrency innovations due to their potential use in facilitating fraudulent transactions. However, compliance with ISO 20022 may change this narrative and encourage central banks to provide space for innovative cryptos to demonstrate their potential. It is projected that central banks will be the next to embrace crypto, riding on the compliance with ISO 20022 provisions. Until then, crypto proponents and innovators must continue to strive for compliance with existing regulatory requirements.