ISO 20022: What it is, What it's for, and compatible cryptocurrencies

In the world of finance, it is vital that institutions communicate efficiently and securely. This led to the creation of ISO 20022, a kind of global "language" that allows financial messages to be understood by different systems. This standard acts as a financial translator, improving communication and strengthening financial services. It enables more efficient and collaborative work. Furthermore, it adapts to new technologies, providing faster, more secure, and reliable transactions. This is a significant advancement that benefits everyone and propels us towards a more connected and agile future.

What is ISO 20022 and what is its purpose?

It is an international standard developed by the International Organization for Standardization (ISO) that defines a set of rules or guidelines for the encoding and exchange of financial information, enabling efficient communication between different entities. It is used in a wide range of applications such as international payments, securities clearing and settlement, confirmation messages, among others.

What is the ISO 20022 standard?

Simply put, this standard establishes how financial data, such as numbers, letters, and symbols, should be represented so that systems can understand them correctly, thus avoiding confusion and errors in transactions.

The standard adapts to different needs and contexts through the concept of profiles, where each profile has specific rules and formats according to the application.

Who created the ISO 20022 standard?

Its development began in 2004 when the need arose to standardize and improve the efficiency of communications in the financial sector, providing a common language and harmonized data structures for information exchange. The ISO technical committee responsible for its creation is known as ISO/TC 68, composed of experts from different countries and organizations specializing in programming languages, information systems, and related technologies.

Importance of complying with ISO 20022 standards

These standards are not mandatory unless required by certain sectors or countries. In fact, their adoption is voluntary, and complying with them offers multiple benefits for organizations. Here are some important reasons to adhere to them:

-          By using a common and structured language, translation issues are avoided, and errors are reduced.

-          The standard is globally recognized, which allows for seamless information exchange and transaction processing.

-          Its standardization ensures that all participants use the same structure and terminology to describe financial information, facilitating message comprehension.

-          The adaptability of the standards allows them to adjust to the needs of each organization or market, providing the option to customize messages.

-          Compliance with these standards contributes to the organization's trust and credibility among clients and business partners.

How many ISO standards currently exist?

To date, there are over 23,000 ISO standards published in various areas, from quality and environmental management to information security, technology, occupational health and safety, among others.

These are developed through consensus among international experts in each respective field and evolve over time, meaning new standards are regularly updated and added, on the official website www.ISO.org the published ones can be viewed.

Each one has an identifying number; the most well-known are ISO 9001 (quality management), ISO 14001 (environmental management), ISO 27001 (information security), and ISO 20022 (financial messages).

ISO 20022 and its compatibility with emerging technologies

This standard, in addition to being an open and flexible one, has proven to be highly compatible with emerging technologies such as blockchain, artificial intelligence, machine learning, the Internet of Things (IoT), mobile payments, and contactless technologies.

Blockchain

Known for its immutable and secure ledger, it integrates easily with ISO 20022 for the specific format required by the blockchain when participants share and validate transactions.

Artificial intelligence and machine learning

ISO 20022 provides a rich and standardized data structure that facilitates the application of AI algorithms in financial data analysis, fraud detection, and automated decision-making.

The Internet of Things (IoT)

Its compatibility with ISO 20022 occurs when data collected by IoT devices is organized and shared in a common and structured way using this standard.

Mobile payments and contactless technologies

The standard allows for the exchange of information related to these transactions, such as card data, transaction amount, and approval response.

List of ISO 20022 compatible cryptocurrencies

The standard is primarily used for traditional financial payments and transactions and is not directly related to cryptocurrencies. However, some cryptocurrencies have decided to implement adaptations or integrations with ISO 20022 to facilitate the exchange of financial information or comply with established communication standards. Some of these are:

 XRP (Ripple)

LThe cryptocurrency developed by Ripple Labs has gained popularity due to its focus on improving cross-border payments and digital asset settlement, working hard to make XRP compatible with ISO 20022, which allows for more fluid integration with the traditional financial system.

QNT (Quant)

The blockchain platform is focused on interoperability and connectivity between different networks and systems; its compatibility with ISO 20022 is a fundamental aspect that ensures its ability to communicate with other financial systems.

XLM (Stellar)

It is another blockchain platform focused on facilitating fast and economical payments. It is also compatible with ISO 20022, which has allowed it to easily integrate with existing monetary systems, facilitating interoperability between different platforms.

The cryptocurrencies mentioned above are just some of those that have achieved compatibility, but others have also done so, such as Algorand (ALGO), Hedera HashGraph (HBAR), IOTA (MIOTA), and XDC Network (XDC). It is likely that more will gradually join as blockchain technology evolves.

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Evolution of ISO 20022 in 2023

In 2023, ISO 20022 has integrated with blockchain technology, enhancing financial services and facilitating the global adoption of digital assets. It adapts to specific and regional needs, allowing for greater development and technological advancements in the economic system. Its worldwide adoption has impacted both conventional money and cryptocurrencies. The changes made include expanding supported currencies, security improvements, and features like cross-chain interoperability. These adaptations demonstrate how ISO 20022 adjusts to the evolving needs of the financial sector and promises a superior level in 2023.

Read the articles: Top 20 Cryptocurrencies 2023 and crypto tokens

Benefits of ISO 20022 Standards

In the realm of payments and transactions, these standards offer multiple benefits, including:

Standardization

ISO 20022 defines a specific, but above all common, format and structure for those involved in financial messages and data. This aims to facilitate communication and information exchange between different systems, as well as increase efficiency when making payments and transactions.

Increased Data Capacity

The amount of information allowed in older message formats was limited. Now, with ISO 20022, this capacity has been expanded, allowing for the inclusion of details such as full name, address, payment purpose, and other additional information necessary for communications to be clearer, more precise, and complete.

Improved Data Quality

Before ISO 20022, financial message formats could vary, often leading to problems in understanding and interpretation. Now, with this standard, financial systems are guaranteed that shared information is accurate and reliable, with a low possibility of errors and misunderstandings.

Conclusion

In summary, these standards are common rules that help financial systems better understand each other, facilitate communication, and reduce the risk of errors, confusion, or misunderstandings, not only in traditional finance but also in the world of cryptocurrencies. Its future is quite promising; with its adaptability, ISO 20022 is ready to continue evolving in digital finance and in the adoption of emerging technologies.

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