ISO code 20022 - The door opener for cryptocurrencies
- March 3, 2023
- Posted by:Julia
- Categories:cryptocurrencies, regulation
In the business section of the newspaper, one stumbles over abbreviations again and again, including ISO, the International Organization for Standartization.
Without ISO, important standards would be missing in the market economy, ranging from quality management to environmental management to social responsibility. The goal of the independent and non-governmental organization ISO is to promote worldwide cooperation in the development and implementation of uniform rules.
So how are these standards relevant to the establishment of cryptocurrencies?
By setting standards, cryptocurrencies can be better understood, compared, and valued. Likewise, global anti-money laundering (AML) and counter-terrorist financing (CFT) regulations can be better implemented. This helps establish cryptocurrencies as a legitimate financial instrument and can help increase trust in them.
The implementation of these standards for blockchain technologies is currently progressing only slowly. There are already some uniform definitions in relation to blockchain technologies, but hardly any for cryptocurrencies. This is particularly due to the fact that the cryptocurrency industry is very dynamic and fast-moving, which makes the development of standardizations can be difficult. Currently, the conflicts of ISO codes for cryptocurrencies with existing codes are also causing problems. Common crypto abbreviations such as bitcoin (XBT) compete with the existing ISO code BT for the country of Bhutan. The X in front of the currency represents assets that are not tied to a country, such as gold (XAU).
Why is the topic of the ISO standard important right now?
The introduction of ISO 20022 will set a new communication standard for all financial institutions worldwide and improve the international transfer of funds. Europe began converting to ISO 20022 in November 2022, followed by the U.S., probably in 2023.
Cryptocurrencies that update their blockchains to comply with this new ISO standard could be selected by banks for payments and thus increase in price due to possibly gained trust. Of course, it is the project behind the cryptocurrency and not just the connection to a standard that is crucial for its success, and yet it can have a promoting effect.
Customers wishing to send decentralized cryptocurrencies via central banks can now count on improved security as the blockchain is able to meet all SWIFT communication requirements, including the transfer of customer data on the blockchain. Already members of the ISO 20022 standards body at the time of writing are only Ripple and Stellar Lumens. Other cryptocurrencies should benefit from this representation on the standards committee in the future.
As cryptocurrencies become more widely accepted and integrated into the existing financial system, conformance to the ISO standard will be an important factor in the success and continued adoption of cryptocurrencies. Standardization will enable advances in efficiency and pave the way for new innovations.
Although fiat currencies have currency codes based on ISO 4217, cryptocurrencies have unofficial ISO codes and will use DTIs (Digital Token Identifiers) such as Bitcoins "XBT" in the future, provided they are selected by commercial banks for payments. The introduction of DTIs is an important step towards creating standards and norms for digital assets and improving the efficiency and security of transactions on the blockchain.
The final steps in ISO 20022 implementation will still be completed by 2025.
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