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Posted 2 mins ago | by Catoshi Nakamoto
Financial institutions are doing away with old forms of communication and adopting a new, interoperable standard for financial messaging. As every corner of the financial space continues to evolve with the times, at last, crypto assets are set to have their day in the sun. This transition is not only affirming crypto’s functional capabilities, but it ultimately validates the fact that blockchain technology is here to revolutionize the future of the financial sector. Let’s get it!
(Intro)
In this video, we’re going to discuss ISO 20022,- what it is, -the implications surrounding the modernization of finance,- and how this is mega bullish for the handful of coins involved.
The days of waiting around for a bank wire to go through are about to be over. If you’re unfamiliar with the traditional financial sector, there’s a handful of different messaging systems, or languages, that the institutions and banks use to communicate with each other. Some of them are more time consuming than others, and their global compatibility is like putting a PlayStation game in an Xbox. No worky. Before we get into how this is going to revolutionize crypto we have to define a lot of banker speak and A LOT of acronyms. I’ll give you a minute to take notes… ok let’s get into it. ISO is the International Organization of Standardization, and back in 2018, this updated, modernized way for financial institutions to communicate with each other. The most common of these languages is the SWIFT standard. SWIFT stands for Society for Worldwide Interbank Telecommunications; this MT or Message Type, under the ISO 15022 standard, is used for “international payments, cash management, trade finance and treasury business.”
This system has been utilized since the birth of Yeezy in 1977, and with the natural progression of tech and the dawn of crypto assets, it’s only been a matter of time until a faster, more efficient system gets put in place. Now the time has come, and in a matter of months, the ISO 20022 standard will reinvent the wheel of financial communication. All of the past messaging formats will be consolidated into a new language, known as MX messages, powered by eXtensbile Markup Language, or XML and Abstract Syntax Notation (ASN.1) protocols. SWIFT has stated that they will “enable ISO 20022 messages for cross border payments and cash reporting business, starting from August 2022 on an opt-in basis, and November 2022 for general availability.” After that, there will be a three-year period where the old and the new systems will co-exist, allowing banks to adopt at their own pace. By November 2025, the old system will be retired and the innovative migration to ISO 20022 will be complete.
This system is already utilized by over 70 countries worldwide including Switzerland, Japan, India and China. An array of other countries have already set their dates for their transitions and the United States Federal Reserve Board stated last October that the Federal Reserve Banks will adopt the ISO 20022 system for Fedwire Funds Service by November 2023. In the past, it was discussed that the U.S should do a three-stage transition to the new standard, but after much consideration, the FED board suggested to make the switch in one day. The U.S jumping on board not only legitimizes the push for the global standardization, but it will also expedite the situation without question. It’s projected that by 2023, ISO 20022 will account for 80% of transaction volumes and 87% of transaction value globally. (source) The pros for every country to adopt to this standard heavily outweigh the cons. The compatibility, speed and efficiency are incomparable to the old standard. The straight-through processing will reduce maintenance costs and lessen the need for banks to intervein, which leads to less delays for the customers. The enriched data and analytics will help identify fraud and money laundering. The reasons why go on and on…but overall, this global transition to ISO 20022 will have a profound impact on the worldwide financial sector. Sounds too good to be true, right? So…what’s the catch?
Yes, this is a great thing for the speed and efficiency for the global payments system, but the centralization factor of this new standard inherently goes against the nature of why crypto was created in the first place. Friend of the channel Crypto Wendy O has some strong feelings, “ISO is going to determine which crypto currencies are SAFE; it’s basically a big group of people that dictate what you can and can’t do with your money.” I couldn’t agree with her stance more. This centralized global standardization is the antithesis to the libertarian push for financial privacy and economic freedom. Some people even theorize that this is going to hold back Bitcoin and Ethereum because they’re not compliant. I don’t buy that, but I do worry that the thousands of lesser-known altcoins that don’t make it through the ISO filter could definitely suffer in the long term. Especially when they’re sitting next to the compliant coins who will seem like the teacher’s pet when regulation starts to crack down. The thing is, not all crypto’s are created equal, and some of them thought it would be a good idea to be centralized and to work hand in hand with the banks. To be frank, I’m not at all a fan of centralization, and I hope that DeFi and every project that’s not ISO 20022 compliant can coexist in the future once everything is regulated. In the same breath, that doesn’t mean you can’t make money off the coins that are going to pop because they ARE ISO 20022 compliant. Think of it like this: just because you hate the Colts, doesn’t mean you shouldn’t draft Johnathan Taylor on your fantasy team.
So what coins are ISO 20022 compliant?
Two coins in specific, are beyond compliant…they’re on the team. The first of the two to become a member of the ISO 20022 Standards Body (source) is XRP. This is a big reason why I’ve been so bullish on XRP, especially with a long-term mindset. Thanks to their Distributed Ledger Technology, XRP is literally shaping the future of cross border payments while simultaneously reducing operational costs thanks to their On-Demand Liquidity. There’s not a snowball’s chance in miami that dirty Gary Gensler and the SEC is going to stop this train. They’re just drawing the situation out as long as they possibly can to push out the weak hands. That’s the game. The second coin on the ISO governing body is the Ramsey Bolton of crypto – Stellar Lumens, or XLM. They are a part of this new standard because, international juggernaut IBM, uses Stellar to run their stablecoin issuing operation. I wonder how Jeb McCaleb is going to get over on this one. So XRP and XLM are on the Standards Body and are sort of running the show, but what other coins are compliant? There’s three more as of now.
The first is XinFin, or XDC. Their website states their protocol “gives enterprises a flexibility to convert the legacy system operation from a Hub-n-spoke single point of failure operation to a distributed or decentralized system.”
The next coin on the list is IOTA. They also have a grasp on the distributed ledger technology, they have big plans for smart cities and are they define themselves as “An open, feeless data and value transfer protocol.”
The last, but certainly not least on the compliant list is Algorand. Set to sponsor the soccer world cup this year, Algo is the self-proclaimed, “world’s most decentralized, scalable, and secure blockchain infrastructure.” Not only do they have a killer marketing team, every smart contract that runs on the AVM, is written in the TEAL language. This allows the ALGO network to process tens of thousands of transactions per second and their time of finality 5 seconds or less. The Algo team has definitely done their homework, be sure to keep an eye on how this coin evolves over time; it’s one to watch. Overall, XRP, XLM, XDC, IOTA and ALGO are the 5 coins that are currently ISO compliant. What puts them all in the same basket is their attention to international wire transfers and security. There are more coins that are circulating through the rumor mill that could be compliant, but nothing if official quite yet. These include Cardano, Quant and Hedera Hashgraph. Long story short, ISO 20022 is the global play to expedite and improve the utilization of the global payment system, and naturally, without blockchain technology, this wouldn’t be possible. This transition also paves the road for CBDCs, which are coming much sooner than most people think. It turns out that the global payment system decided that centralization is more important than privacy…but like Wendy O said, crypto is not one size fits all. Hopefully this transition is done in a way where sectors like DEFI and stablecoins can coexist with ISO’s agenda for the future of finance. Time will tell. Either way, XRP will pump.
That’s all I got. Be blessed. Bitboy out!
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