- This article explores what is ISO 20022 and how XRP and XLM could leverage the new standard in the market.
The crypto community often touts XRP and Stellar (XLM) as ISO 20022-compliant assets. Their status as “bridge currencies” for cross-border payments positions them at the forefront of the next evolution of global finance. However, some may not truly understand the gravity of this fact.
What is ISO 20022
ISO 20022 is an international electronic messaging standard between financial institutions. It creates a standardized, unified, and vast data set for a more efficient, interoperable, user experience-centric, and detailed platform compared to legacy systems employed by SWIFT MT or FIN Messages under the outgoing ISO 15022 standard.
The new standard unlocks a structured, machine-readable format (XML) for embedding extensive data within each transaction. Additionally, the feature allows parties to share remittance information, invoice data, and the purpose of each transaction. These enable banks and payment processors to reconcile payments and enforce KYC (Know Your Customer) protocols easier in adherence to international anti-money laundering (AML), anti-terrorism financing, and fraud detection rules.
XRP And XLM’s ISO 20022 Compliance
Analysts widely consider the XRP and XLM cross-border payment networks compliant with the ISO 20022 standards. As cryptocurrencies or digital assets, they don’t possess a certification from the official ISO body. Nonetheless, their underlying technologies align and support the organization’s messaging formats and communication protocols.
It’s worth noting that Ripple, the company associated with XRP, has been a member of the ISO 20022 Standards Body since 2020. This means that its payment network, RippleNet, works with financial institutions that are adopting the new ISO standard through an integrated API (Application Programming Interface).
In this framework, XRP’s actual value emanates from its role as an on-demand liquidity (ODL) infrastructure. It ditches the cross-border payment sector’s reliance on pre-fund bank accounts in various foreign currencies (Nostro accounts) in favor of the ODL pool.
Stellar does not carry ISO 20022 certification, but its Stellar Ecosystem Proposals (SEPs) achieves ISO alignment with its robust technical standards for building financial infrastructure on the chain. SEP-9 allows exchange of KYC data in a machine-readable format, while SEP-31 defines cross-border payment flows between regulated financial institutions and virtual asset service providers (VASPs) on the Stellar network.
Overall, the ISO 20022 migration provides a clear pathway for XRP and XLM to move beyond niche use cases and become foundational components of a more efficient, transparent, regulated, and interconnected global payment system. The regulatory compliance, safeguards, and system enhancements address key challenges that have virtually hindered the broader institutional adoption of digital assets.
The ensuing boost in adoption for assets like XRP and XLM could ultimately elevate their institutional and retail demand and generate more value for their underlying tech and assets.
