2023-12-20 11:30:12
Авторка: Inna Svatenko 
ISO 20022 and cryptocurrencies
When money is transferred from one financial institution to another, information exchange takes place between them: the payment amount and currency, the sender and the recipient, the intermediary platform, etc. This information must be structured so that transactions are executed quickly and correctly.
Historically, data standards have differed between companies, creating inconsistencies in the payment cycle. The lack of a common standard forced financial institutions to translate data into a different format for each transaction.
ISO 20022 is a common data standard that improves communication between companies using different standards. Every year, more and more financial institutions start using it. How does this affect the world of digital money and investment, and is cryptocurrency ISO 20022-compliant? The answers are in our article.
Content
About ISO 20022
Imagine two foreigners who only speak their native languages, such as Spanish and German. They can only communicate with each other with the help of an interpreter. There is a risk that some of their expressions may be mistranslated and misinterpreted. If each of these people knew another common language, such as English, it would be easier for them to exchange information.
The above example helps to better understand ISO 20022 — what it is and why it is needed. It stipulates the use of a single XML language for all financial messages. This speeds up payments, improves interoperability, reduces friction, and makes documentation more correct.
The international SWIFT system supported ISO 20022 in 2018. Today, the standard is used in 70 countries around the world. Experts state that ISO 20022 will ensure the usability of CBDCs once they are globally implemented.
Does Ukraine use ISO 20022? The National Bank switched to ISO 20022 in April 2023. This move is part of the National Bank’s Strategy 2025 and one of the requirements for Ukraine’s accession to the European Union.
ISO 20022-compliant cryptocurrencies
As of today, the following coins are officially known to have adopted ISO 20022:
- QNT
- HBAR
- XRP
- XDC
- XLM
- MIOTA
- ALGO
- ADA
- XVG
Let’s take a closer look at the most popular ones.
Ripple (XRP)
Ripple was the first to implement ISO 20022 in 2020. The organization actively cooperates with financial institutions to accelerate payments, including international payments. XRP is used as an intermediate currency and facilitates the exchange of fiat currency values.
Stellar (XLM)
Stellar is a DEX platform that is a kind of “bridge” for financial institutions, payment processors, and their customers, making global payments easier and more affordable. XLM is a token that enables the exchange of value between monetary units of different countries.
Cardano (ADA)
The Cardano blockchain platform is used to develop dApps and smart contracts. The ADA cryptocurrency is used for transactions, betting, and platform management.
Impact of ISO 20022 on the world of investment and cryptocurrencies
Implementing ISO 20022 will allow blockchain platforms to speak the same language as banks. Coins that conform to a common standard will undoubtedly benefit. Fintech institutions around the world will be able to incorporate them into their infrastructure and use them for payments. At the same time, analysts say the ISO 20022 standard could prevent cryptocurrencies like Bitcoin and Ether from gaining widespread adoption.
Does ISO 20022 affect crypto investments, and how to make money from coins that have adopted the standard? According to experts, the acceptance of cryptocurrency in society and its widespread use indicates the reliability and stability of the coin, which will support the exchange rate. Including cryptocurrencies with ISO 20022 in an investment portfolio can be a good solution for risk diversification.
Conclusions
- ISO 20022 is a common standard for fast and correct data exchange between financial institutions.
- The National Bank of Ukraine implemented the common standard in 2023, following the EU recommendations.
- As of 2023, ISO 20022 is supported by nine cryptocurrencies, including XRP, XLM, and ADA.
- The implementation of a common standard by cryptocurrency companies facilitates the integration of digital money into the real world.
FAQ
Verge (XVG) is the newest asset to adopt the ISO 20022 standard. There is currently no information about other digital currencies that are planning to adopt it shortly.
The main benefit is the ability for financial institutions to process transactions quickly, avoiding errors. A common standard also helps in the fight against financial terrorism and money laundering (read more about AML verification). The use of ISO 20022 by cryptocurrencies creates an opportunity for their large-scale adoption in the banking system.
A key challenge is maintaining data security and anonymity.
Organizations use data encryption, user identification, and two-step authentication, as well as monitoring and auditing of events and activities. Security systems are regularly updated to prevent vulnerabilities.
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