ISO 20022 Coins - What’s the Big Deal?

Firstly, what is ISO 20022, and what does it even mean?

From their website:

“ISO: the International Organization for Standardization - Headquartered in Geneva, Switzerland

ISO is an independent, non-governmental international organization. It brings global experts together to agree on the best ways of doing things. From climate change and healthcare, to quality management and artificial intelligence, our mission is to make lives easier, safer and better – for everyone, everywhere.” 

As such, the ISO has many standards that can be adapted by various businesses and institutional entities. Did you know that the ISO website lists twenty-six (26) standards relating to various aspects of blockchain technology? Examples include: 

• ISO 20022-6:2013 - Financial services — Universal Financial Industry Message Scheme
  • (Within ISO 20022 there are a total of twenty (20) sub-standards!)
• ISO/TR 23576:2020 - Blockchain and distributed ledger technologies — Security management of Digital Asset Custodians
• ISO/TR 23455:2019 - Blockchain and distributed ledger technologies — Overview of and interactions between Smart Contracts in blockchain and distributed ledger technology systems
• ISO 22739:2024 - Blockchain and distributed ledger technologies — Vocabulary

It’s obvious that standards are important, much like the shipping container standardization improved interoperable transportation and trade; however, there are many standards in blockchain and many blockchains that “tick the boxes of some standards” and some that tick other boxes because their technology relates to a completely different use case. Does that mean one will gain adaption and the others are doomed? The answer is no. But to be ready for standards that apply to their technological solution is important.

For now, let’s focus on the integration of ISO 20022-ready cryptocurrencies into the global financial system. It’s been a topic of significant discussion, and at times, a singularity of retail investor focus and hype. While some claim these cryptocurrencies will dominate the future of finance, the reality is more nuanced.

ISO 20022 is a global standard for financial messaging, aimed at improving interoperability across financial systems. Cryptocurrencies that comply with ISO 20022 such as Quant (QNT), XRP (XRP), Stellar (XLM), XinFin (XDC), Cardano (ADA), Hedera Hashgraph (HBAR) and IOTA are often touted as having a key role in the future financial system due to their compatibility with this standard. However, the adoption of ISO 20022 by financial institutions has been slower than anticipated. In 2023, only 18% of payment instructions used ISO 20022, indicating that the pace of adoption has not met industry expectations.

One of the main factors hampering widespread cryptocurrency adoption, especially in the U.S., is regulatory uncertainty. As of now, the lack of clear regulations around digital assets creates hesitancy among financial institutions to fully integrate cryptocurrencies. In this environment, institutions focus on compliance with existing standards, like ISO 20022, rather than exploring full-scale blockchain adoption.

Despite these challenges, ISO 20022 compliant cryptocurrencies are strategically positioned for the future of universal financial industry messaging standardisation. Once regulatory clarity is established, particularly in major markets like the U.S., these cryptocurrencies may see a surge in adoption. Their ability to facilitate efficient cross-border transactions, improve transparency, and reduce the cost of financial operations makes them attractive for long-term integration into the evolving financial landscape.

The new financial system is unlikely to be dominated by a single blockchain or cryptocurrency or “Standard” as we have identified above. Instead, multiple blockchains will likely coexist, with each offering unique features. For example, Quant’s Overledger facilitates interoperability between different blockchains, making it possible for various platforms to communicate seamlessly. This multi-chain approach is essential for financial institutions to integrate blockchain technology into their existing systems.

The global SWIFT network, which currently dominates cross-border payments, is also evolving to integrate ISO 20022. This evolution may be gradual, with SWIFT coexisting alongside blockchain-based payment systems for the foreseeable future. Financial institutions are likely to adopt a hybrid approach, using both traditional systems like SWIFT and blockchain-based solutions to meet diverse needs. As ISO 20022 standardisation becomes more widespread, both legacy and blockchain systems will have to adapt to ensure seamless interoperability. Interoperability is the key. Standards can ensure interoperability.

In conclusion, ISO 20022-compliant cryptocurrencies are well-positioned to play a significant role in the future financial ecosystem. However, their full potential will only be realized once regulatory frameworks are solidified, and institutions embrace the transformative potential of blockchain technology. The future likely holds a multi-blockchain system, where traditional financial infrastructures like SWIFT and newer blockchain technologies work together to streamline global finance. Standards are very important… and as we have identified, blockchain technology has many agreed-to standards. They are all important if this space is to succeed.

About Ainslie Crypto:

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