Future Crypto payment; Cryptocurrencies in Tandem with ISO 20022

Believe it or not, there is a growing trend towards using cryptocurrencies for payments. Some experts believe crypto could eventually be used with ISO 20022 to facilitate secure and efficient financial transactions. This could involve using cryptocurrency systems to transmit ISO 20022 messages between financial institutions or integrating cryptocurrency payments into existing ISO 20022-based financial processes.

To fully understand which cryptocurrencies are in the race for future payments, you must first understand ISO 20022. So, what is it?

ISO 20022

ISO 20022 is an ISO standard for electronic data interchange between two or more financial institutions. It describes a metadata repository hosting detailed descriptions of messages and business processes. The repository also contains its contents maintenance processes.

The ISO 20022 stretches to financial information transferred among different financial establishments; these include:

  • Payment transactions.
  • Information on all trades carried out.
  • Securities settlement.
  • Debit and credit card transactions among others.

Simply put, the standard is in charge of ensuring that there’s interoperable communication between users, financial institutions, and their market establishments. One of the ways to see the ISO 20022 is via banks. Today, banks clash almost every time while trying to communicate with each other because they speak different “languages.”

A Real-Time Payments System

Large financial establishments such as SWIFT, FED, and ECB aim to adopt an interbank messaging system concurrently. The financial giant SWIFT was supposed to migrate back in November last year, but decided to postpone the matter. This was similar to ECB, pushing its migration by four months last year.

FED, via its newly launched FEDNOW program, is compatible with the previously mentioned regulation. Through FEDNOW, the United States Federal Reserve is organizing a new program whose main agenda will be to meet the market needs 24 hours a day, seven days a week, all year round. Some of the features present include:

  • Simple clearing and settling capabilities, thus supporting numerous types of transactions and usage.
  • Utilizing an ISO that has been accepted and adopted widely (ISO 20022) alongside other practices to facilitate interoperability.
  • Use of fraud detection and prevention tools. These include configuring low transaction limits while specifying conditions under which these tools would block a transaction.
  • Inclusion of a tool to manage liquidity. With this tool’s help, users can transfer funds amongst themselves, supporting liquidity prerequisites associated with instant and fast payments.
  • Implementation of a receive-only system. With the system in place, financial institutions will be able to obtain payments via FEDNOW Service without the need of having the capability to originate payments.

ISO 20022-Compliant Cryptocurrencies

Since the ISO 20022 is more versatile than its predecessors, it requires significantly more data volume. Banks must be equipped to handle vast volumes of databases and process them faster to facilitate real-time payments, effective daily liquidity management, fraud detection, and compliance controls. All these need to be carried out at a significantly more pace than what banks are used to if they are to catch up on cryptocurrencies and blockchain technologies.

Some technologies are favoured more by this change in our financial system on cryptocurrencies. The most obvious ones are the ISO 20022-compliant cryptocurrencies. At the moment of writing this article, only seven cryptocurrencies were ISO 20022 compliant; these include:

  • Quant
  • Ripple
  • Stellar
  • Hedera
  • IOTA
  • XDC Network
  • Algorand
  • Cardano

Ultimately, 2022 has been quite a year for cryptocurrencies, and with the current situation in the market, now is the ideal time to make necessary changes. Making changes during this recession will increase the changes’ effectiveness and set a strong foundation for the crypto market.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.