The financial world is abuzz with discussions about ISO20022, a standard that has become increasingly relevant in the context of digital currencies and blockchain technologies. This standard, developed in 2004 by ISO TC68, a subgroup specializing in financial services, was initially created for legacy systems to enhance payments clearing and settlement globally. Its relevance in the blockchain era, however, deserves a closer examination.
ISO20022 is essentially a financial data standard that enables efficient communication among financial institutions through a unified messaging language. Contrary to popular belief, it was not designed specifically for cryptocurrencies or digital assets. Instead, its application in the blockchain space aligns with its role in legacy financial systems – ensuring compliant data standards.
With the upcoming ISO20022 mandate, there’s speculation about whether “ISO20022 coins” will replace conventional systems like SWIFT. While this transition may not be as drastic as some anticipate, ISO20022 compliance does mean that Distributed Ledger Technology (DLT) networks can be integrated into the financial system, provided they adhere to the standard’s format.
Examples of this integration include:
1. Bank A using $CSPR Nucleus Finance for contracts, adhering to ISO TC68 SC9 standards.
2. Bank B transmitting ISO20022 compatible messages via the $XDC Network.
3. Real-time gross settlement systems translating messages onto DLTs through TC 307 harmonization with tools like the $QNT Overledger API.
4. Bank C leveraging $XRP for instant liquidity bridges, converting currencies in real-time.
However, the role of ISO20022 extends beyond merely facilitating blockchain adoption in banking. It represents an update to the existing ISO15022 standard, aiming to enhance data capacity within each financial message. This development is more about improving data messaging standards than promoting specific technologies.
The broader context involves ISO TC68 and ISO TC307, the standards for financial services and blockchain/DLT, respectively. Their collaboration, particularly in areas like security and reference data in financial services, indicates a growing intersection between DLT and traditional finance. This intersection highlights the potential for blockchain in enhancing security and auditability within the financial sector.
Nonetheless, compliance with ISO20022 should not be seen as a definitive indicator of success for blockchain projects. Rather, it’s a basic requirement or a “barrier for entry” that allows these technologies to be considered for use in the financial sector. In this regard, compliance is analogous to having the necessary qualifications for a job – essential but not a guarantee of selection.
In conclusion, while ISO20022 compliance opens doors for DLT networks in the financial sector, their actual adoption and application depend on various factors. It’s crucial to continue observing developments in this area to understand the full impact of ISO20022 on both finance and blockchain technologies.