Significance of XRP and XLM’s ISO 20022 Compliance
The relevance of XRP and Stellar (XLM) in the cryptocurrency community is often emphasized due to their status as ISO 20022-compliant assets. These digital currencies are regarded as pivotal in the arena of cross-border payments, where they act as essential “bridge currencies.” But why is adhering to ISO 20022, a global standard for electronic messaging between financial institutions, so critical for their reputation and functionality?
ISO 20022 represents an extensive leap in financial data management, providing a standardized, comprehensive, and user-friendly platform for transactions. Unlike the conventional SWIFT MT or FIN messages governed by ISO 15022, ISO 20022 incorporates a structured XML format that accommodates vast amounts of data within each transaction. This advanced framework facilitates the sharing of details such as remittance information, invoice data, and transaction purposes. Consequently, financial entities can better reconcile payments and uphold KYC regulations in accordance with global standards for AML, combatting terrorism financing, and fraud detection.
Enthusiasts consider XRP and Stellar to be compliant with ISO 20022 although these digital assets lack official certification from the ISO body due to their unique nature. These cryptocurrencies, operating at the forefront of remittance, offer underlying technologies that sync with ISO communication formats and protocols. Notably, Ripple, the entity associated with XRP, has been a member of the ISO 20022 Standards Body since 2020, signaling RippleNet’s alignment with the new standard through an integrated API to cater to financial institutions shifting towards ISO compliance.
XRP’s significance lies in its function as an on-demand liquidity (ODL) mechanism, challenging the traditional reliance on pre-funded bank accounts in multiple currencies (Nostro accounts) for cross-border transactions. On the other hand, Stellar, while lacking ISO 20022 accreditation, aligns itself with industry standards through Stellar Ecosystem Proposals (SEPs). SEPs like SEP-9 and SEP-31 establish a foundation for streamlined data exchange and cross-border payments across regulated financial institutions and VASPs using the Stellar network.
By adapting to ISO 20022, XRP and XLM are poised to transcend niche markets, emerging as integral components of a secure, streamlined, and globally connected payment system. The regulatory compliance afforded by ISO standards, coupled with enhanced security measures, paves the way for broader institutional adoption of digital assets. Consequently, the enhanced appeal of assets like XRP and XLM could drive significant value appreciation for their technologies and underlying assets, catering to the demands of institutional and retail investors alike.
