Cryptocurrencies are inherently decentralized. Outside of the government purview, investors can trade assets in an opaque manner. While great for those who value privacy, these systems are also difficult to regulate.
ISO (International Organization for Standardization) is a non-governmental global organization based in Geneva, Switzerland. ISO develops international standards for industrial, commercial, and proprietary use. If an ISO standard is established, virtually all financial institutions in the world adopt it.
In October 2021 the FSR announced that Federal Reserve Banks will adopt the ISO 20022 message format for its Fedwire Funds Service. In doing so, the Federal Reserve will be able to transition toward the payment ecosystem of the future.
“Having one centralized language for global payment flow seems like a good idea. The fact that this language is more flexible, and in many ways better, than the existing infrastructure is also a great thing for central banks. The FSR is targeting a single-day migration for November 2023. Thus, we’re about a year away from having the global payments infrastructure disrupted as we know it.”
- Chris MacDonald, InvestorPlace
ISO has largely ignored cryptos until the last few years, when CDBCs (Central Bank Digital Currencies) started gaining momentum. Currently, financial institutions rely on the ISO 4217 standard to identify currencies for global transactions. For example, the US Dollar is assigned the code “USD” in this standard.
Given the lack of ISO codes in the crypto world, cryptos currently use unofficial ISO codes, such as “XBT” for Bitcoin. However, in the new “ISO 20022” standard, cryptos could be assigned ISO codes if they comply with ISO regulations. This could lead to adoption by centralized banks and enable cross-border crypto payments through centralized financial institutions.