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- The financial world is headed toward a shared ledger and universal messaging protocol, and according to SWIFT, this can only be achieved through ISO 20022-compliant solutions.
- In the crypto world, ISO 20022 compliance is spearheaded by XRP, Stellar, IOTA, Hedera, Algorand, and Cardano, which could all play a significant role in the new financial order.
Fragmentation of the financial world, where every other institution has unique and incompatible networks and systems, has been the biggest challenge. This is gradually changing as the world evolves to adopt common standards, and according to insights from SWIFT, this revolution could be spearheaded by ISO 20022-compliant networks.
In a recent blog post on the need for rich data in a shared ledger paradigm, SWIFT discussed the need for a universal ledger that aggregates most existing networks. This concept is not new; the Bank for International Systems presented its blueprint for such a system: the ‘unified ledger.’
A shared universal ledger would record the aggregated balances across hundreds of individual systems with real-time visibility and accessible to all the participants.
According to SWIFT, this system would depend on a messaging layer based on the ISO 20022 standard. The blog post noted:
An ISO 20022-based messaging layer will enhance the shared ledger proposition by offering a payload of rich and structured data to fulfill the adjacent functions that are essential to the completion of any regulated financial transaction in an instant and frictionless way.
A shared ledger would reduce the risk and cost of financial transactions. It would also offer instant settlement and atomic transactions where payment and delivery happen simultaneously. The participating institutions could also build additional services on top of this ledger to reach marginalized users and expand financial inclusion.
The Role of ISO 20022-Compliant Blockchains
While a universal ledger sounds alluring, it can only exist alongside a robust messaging layer that relays rich and structured data about any transaction. This layer can only be built on blockchain, as the technology is adept at recording any movement of funds and cannot be altered.
A blockchain-based messaging layer would relay data such as AML compliance, sanction screening, and account reconciliation along with the transaction.
SWIFT acknowledged the importance of ISO 20022, stating, “The industry has come a long way in transforming payments with rich, structured data via ISO 20022, with the benefits of this shift now starting to become apparent.”
It added:
Moving forward, an ISO 20022-based messaging layer will enhance the shared ledger proposition by offering a payload of rich and structured data to fulfill the adjacent functions that are essential to the completion of any regulated financial transaction in an instant and frictionless way.
As Crypto News Flash reported, blockchain networks that are compliant with ISO 20022 include Hedera, Stellar, XRPL, Cardano, IOTA, Verge, Algorand, and Quant. These networks will be at the heart of the tokenization surge and be part of the multi-trillion-dollar digital payments sector.
