So… where did we leave off? Oh yes, we had just gotten to the juicy bit of our story about a possible, universal financial messaging system. But, before we go on, a quick recap. To talk to one another, financial institutions around the world used to use these cool electromechanical typewriters. Then, in 1973, some banks, businesses, and other important organizations got together and gave the world SWIFT… SWIFT is, and always has been, awesome. But now… it’s time for a change, something to usher us into the new age, and that brings us right back around to ISO 20022.
So, ISO 20022 is this common language, and model, for financial messages across the world… or, it will be, when it’s launched. Currently, that launch is set for November of this year, and the cool things we’re about to see as a result are going to blow our minds. It’s anticipated that, as major currencies adopt ISO 20022, it will be processing 80% of global, high-value payments. Now… you can probably see where we’re going with this as it pertains to crypto. This may be the perfect framework upon which to lay CBDCs.
It is important to note that the ISO 20022 standard is not new; however, the rate of adoption for the standard is quick, and is only accelerating. Over the next few years, we’re going to see mass adoption, and get to witness an evolution of our monetary system at a scale that hasn’t happened in decades. According to the Head of Standards at SWIFT, Stephen Lindsay, major currencies that adopt the standard before 2025 will be setup to reap the benefits, as opposed to the laggards.
J.P. Morgan has spoken out about the shift, encouraging institutions to go ahead and migrate… a move they say will grant the opportunity to move from passive to active in ongoing data conversations. Instead of formatting data continually to adjust to different market infrastructures, those on board will be able to harness and wield data across the entire payment ecosystem. The message is clear: don’t get left behind… high value clearing systems and SWIFT formats are migrating to ISO 20022.
Cross-Border CBDC
With ISO 20022 creating a globally agreed upon common language for payments data, we believe it will set the stage for CBDCs to flourish. It may sound farfetched, but this assertion isn’t conjecture… as we speak, the SWIFT network is working on exploring cross-border CBDC payments, teaming up with a company called Capgemini to for the project.
The collaboration will see the two companies testing interlinking, domestic CBDC networks. Just the sound of it raises the hairs on our arms, this ambitious undertaking is history playing out in front of our eyes. We say it’s historical not just because we’re witnessing this financial evolution, but because… with economies accounting for 90% of global GDP currently exploring CBDCs, we understand the weight of the testing occurring.
Things are moving fast, there’s no time to waste, and how this plays out could mean the shifting of pieces on the global financial chess board. A perfect illustration of this assertion exists when we look at China, which already has a digital currency. In May of this year, it hit $43 million worth of CBDC transactions… in that month alone. This may be a “get to market now, perfect later” situation, the early birds here are going to be able to set the tone for the rest of us, and for who knows how long.
But… does it have to be a race? Could this, instead, be an opportunity for all of us? There is a version of this story where interoperability and cooperation are the path and are beneficial to all, not just the lucky few who beat the rest to the table. As dramatic as it sounds, SWIFT and the migration to ISO 20022 are the possible first steps on that path, should we decide to take them. A system that unifies digital currencies globally and plays on our common strengths rather than our perceived differences.
If ISO 20022 is adopted widely enough, the standard could transform the cross-border payment processes to such a degree that it could handle the problems of high costs, delays, legacy systems reliance, transparency, and standardization. It’s like going from a network of back-roads made of gravel to a state-of-the-art interstate system for the entire world.
A normal transaction, depending on where it’s coming from, the amount, and what network, can take hours, days, or even weeks. If implemented as proposed, ISO 20022 would shrink that window down to ten seconds or less. Ten… seconds… so, this system would take a complex, slow, expensive process and would not only reduce the cost and do things more accurately, but do it within ten seconds? Take my money, please!
The Future Awaits
The next logical question here is… will we need SWIFT at all one day? Some think we won’t, and that SWIFT won’t even exist in the next five years. One of those people is Mastercard CEO Michael Miebach. It’s our understanding that Michael recently expressed this sentiment at DAVOS and made an entire room of crypto and financial experts audibly gasp… heresy or foresight, joke or truth spoken in jest?
There’s another layer to this, hiding just beneath the possibilities for this standard… the changes it will force that will radiate out through the financial world. For decades, things have been done a certain way… and it worked, and now it doesn’t. With the implementation of ISO 20022, organizations and institutions will be forced to peel back the weathered wallpaper of their practices, to question the very structure upon which they’ve built their businesses.
It sounds like just the kind of shakeup that uncovers buried treasure… and we can’t wait. Keep coming back as we hunt for tomorrow’s gold in the midst of chaotic change. We aren’t just watching prices and trends… we’re looking into the future. Doubling down on understanding the technical infrastructure in the crypto space that will be the foundation of tomorrow’s money, and we want you with us on the journey.