Geneva, Switzerland is home to the non-governmental International Organization for Standardization (ISO). International standards are created by ISO for use in business, industry, and proprietary applications. Almost all financial institutions worldwide implement an ISO standard if one is created. More than any other move, an ISO code for Bitcoin (BTC) might accelerate its adoption by the general public.
Prior to the previous few years, when CDBCs (Central Bank Digital Currencies) began to gain traction, ISO had mostly disregarded cryptocurrencies. The ISO 4217 standard is currently used by financial institutions to identify currencies for international transactions. The US Dollar, for instance, has the code “USD” according to this standard.
Cryptos now employ unauthorized ISO codes, such as “XBT” for Bitcoin, due to the absence of legitimate ISO codes in the cryptosphere. However, under the new “ISO 20022” standard, cryptos who adhere to it may be given ISO codes. This might encourage centralized banks to adopt it, opening the door for cross-border cryptocurrency payments through centralized financial institutions.
What Objectives Are Served by ISO Standards?
By ensuring that the goods being produced are secure and of a decent caliber, ISO hopes to advance global trade and defend consumers.
Over 20,000 standards have been established by ISO to far, and the organization regularly maintains them by publishing technical reports, analyses, and publications. The 97 categories of standards listed in the ISO library encompass a variety of industries, such as medicine, agriculture, engineering, shipping, armament, and metallurgy. One of the numerous businesses for which ISO develops standards is the international financial sector.
In some instances, products that were created in accordance with a particular standard are referred to as “ISO” products. For instance, bicycles adhere to the ISO 4210 standard. The maker of a bicycle would need to classify it using the ISO code in order to avoid having it rejected at a shipping port if a retailer sought to import it into the US.
What part does ISO 20022 play in cryptography?
A centralized bank that supports crypto payments might authorize a cryptocurrency if it meets with the ISO 20022 standard. The use of crypto will shift as a result of ISO standard crypto IDs. A cryptocurrency like Bitcoin or Ether (ETH) will be included to the database tables of prestigious financial institutions like Visa and MasterCard if ISO assigns an official code for it.
The ISO 4217 Currency Identifier Standard: What is it?
Under ISO 4217, the organization specifies fiat currency standards. Since its initial codification in 1978, the 4217 standard has been applied to international bank transfers and stock exchanges. The standard assigns three letters to each currency, such as “USD” for US Dollars, “EUR” for Euros, and so on. This makes it easier to conduct business internationally and lowers the possibility of mistakes.
When a bank user transfers $500 USD to another bank user, they are automatically adhering to the guidelines established by the ISO 4217 currency code list, which abbreviates the US Dollar as “USD.” Along with currency codes, ISO also gives stocks, bonds, and derivatives International Securities Identification Number (ISIN) codes.
The first two letters of an official currency code are often taken from the alphabetic country code (as defined in ISO 3166) and the last letter is typically taken from the name of the official currency. For instance, the “CA” refers for “Canada” and the “D” stands for “dollar” in the symbol “CAD.”
Because many crypto codes contradict with existing country codes, the current code definition process presents problems for the codification of cryptography. Take “XBT,” the unofficial ISO code for Bitcoin, as an illustration. Similar to the codes for gold (XAU) and silver (SLV), the letter “X” indicates that no country is linked with the item (XAG). However, there is a contradiction because the “BT” standing for “Bitcoin” is already used to denote Bhutan in ISO 4217.
Cryptocurrencies must both meet new requirements in international financial systems and have an ISO code that doesn't contradict with already-existing codes in order to be recognized by ISO as legal tender.
DTIs: An Introduction to What They Are
The identification numbers or symbols known as “Digital Token Identifiers” (DTIs) are used to identify digital currency. Due to the lack of identifiers that banks may employ to distinguish token transactions, using digital currencies to transact presents the main issue. For instance, it would be simple for a bank computer to distinguish between “USD” and “AUD,” but “Bitcoin” and “Bitcoin Cash” are more challenging.
It was determined by ISO in 2016 that cryptocurrencies could not be given official currency codes under the ISO 4217 standard. In its place, a new class of codes known as digital token identifiers would be the answer to the problem of identifying digital currency.
Digital token identification standard ISO 24165-1:2021, published by ISO, was made available in September 2021. This standard enables token makers to give their tokens fixed-length identifiers and register them in the ISO database. Financial institutions all around the world will be able to manage digital tokens on behalf of their clients thanks to the standardization of these codes and their deployment.
How Does ISO 20022 Work?
All financial institutions throughout the world will adopt a new communication standard thanks to the ISO 20022 standard. The 20022 standard will fundamentally alter the financial environment and enhance cross-border money transactions. The US will adopt ISO 20022 in 2023, and Europe will switch over toward the end of 2022.
If banks decide to use them for payments, cryptocurrencies that update their blockchains to meet this new ISO standard will certainly see an increase in price.
Global payment systems, messaging formats, trade, and other operations will all use the new ISO 200222 standard. Changes are outlined, including new digital token identification and data encoding in XLM format. 37 of the biggest financial players in the world, including Ripple, make up the “Registration Management Group,” which created it (XRP). According to Ripple's vice president, Ripple already conforms with ISO 20022, and along with RippleNet, will be the first cryptocurrency business prepared for the new global financial standard.
Update to ISO 20022
The beginning of 2023 will see the complete upgrading to ISO 20022 of SWIFT, the international money transfer system used by banks. By 2025, it won't even be utilized in its original version anymore.
Every bank in the globe will use the same payment protocol when processing payments, whether they are made in JPY at the Bank of Japan or EUR at Deutsche Bank. Consequently, there is a chance that the upgrade will include cryptos that are compliant with the new standard.
What Qualifies a Cryptocurrency as ISO-Compliant?
Certain cryptocurrencies may benefit from the 20022 ISO update by becoming ISO-compliant and being chosen by banks for crypto payments. Although the blockchain community sometimes critiques centralized bank services as being slow and archaic, this update may indicate they are ready for change.
A cryptocurrency blockchain would need to meet all of the SWIFT communication standards, including the capacity to pass customer data on the blockchain, in order to be considered compliant. Customers sending decentralized cryptocurrency through centralized banks will be more secure as a result of this.
ISO 20022 Crypto List
Stellar Lumens (XLM) and Ripple's XRP (XRP) are the only two cryptos that are currently interoperable. Cryptocurrencies like MIOTA (IOTA) and Algorand (ALGO), according to rumors, are also compliant. However, only Ripple is a recognized member of the ISO 20022 management group.
The complete list of cryptocurrencies that adhere to ISO 20022 is provided below:
- Ripple (XRP) – Member of the ISO 20022 Standards Body
- StellarLumens (XLM) – Member of the ISO 20022 Standards Body
- XinFin (XDC) – Compliant
- IOTA (MIOTA) – Compliant
- Algorand (ALGO) – Compliant
- HederaHashgraph (HBAR) – Rumored to be compliant
- Quant (QNT) – Rumored to be compliant
- Cardano (ADA) – Rumored to be compliant
What makes Ripple eligible to join this organization with such powerhouses as Visa and MasterCard? Only behind Stripe, Ripple is currently the second-largest fintech business in the US. Both the cryptocurrency used by Ripple, XRP, and Stellar Lumens, XLM (both invented by Jed McCaleb), are intended to move money at extremely high speeds and cheap costs. Compared to Bitcoin, the typical XRP transaction (tps) settles in three seconds.
The key distinction between these two cryptocurrencies is that whereas XRP is targeted at the financial industry, XLM is targeted at governments and virtual currencies. For starters, Ukraine selected XLM to become its official digital money (CDBC).
Final thoughts
ISO is a group with the mission of establishing global safety norms and establishing worldwide standards in all areas of production. This group controls financial institution rules and can influence how widely cryptocurrencies are used.
For fiat currencies, ISO has created codes under ISO 4217, while cryptos are not formally categorized and utilize unofficial ISO codes. When cryptos are selected by commercial banks to be used as payment methods in the future, they will utilize DTIs (digital token identifiers), such as “XBT” for Bitcoin.
Financial institutions will start implementing the ISO 20022 standard for communication over the upcoming few years, after which they will formally be permitted to accept cryptocurrency for payments. The only cryptocurrency business that now complies with the new requirements and is a part of the ISO 20022 management group is Ripple. The benefits of other cryptos adopting ISO standards are enormous.