What is SWIFT?
To begin with in order to completely understand what ISO 20022 is, we need to know what ISO standards are.
Current and latest version of ISO standard used in financial information systems is ISO 9001.2015, developed and put into use in 2015.
SWIFT - Society for Worldwide Interbank Financial Telecommunications is a global financial institutions messaging network designed and developed to transfer and receive information in standardized manner in order to increase interoperability.
ISO - The International Organization for Standardization is nongovernmental, international organization founded in 1947 in Geneva, Switzerland, "it develops and publishes a wide range of proprietary, industrial, and commercial standards and is comprised of representatives from various national standards organizations." ~citing investopedia.com
Who and why use SWIFT?
- Banks
- Brokerage institutes and trading houses
- Securities dealers
- Asset management companies
- Clearinghouses
- Depositories
- Exchanges
- Corporate business houses
- Treasury market participants and service providers
- Individuals or businesses making international wires or money transfers
- Foreign exchange and money brokers
~citing Investopedia.com
As of 2022, SWIFT was used by more than 11000 institutions across more than 200 countries. It is the biggest financial information exchange platform, and in order to work properly it needs a way to communicate and work, and it does so by using ISO standards.
Eight years in financial world is a long time. Financial industry evolves and grows day by day and it needs change, that's why SWIFT is "upgrading" their way of work by improving their framework called ISO.
ISO 20022 is set to start in March 2023, and focuses on improving quality of data, adoption, automation and structure of data. What the difference is in March ISO version is its innovative approach to digital asset class.
What is the problem?
ISO standards by their design are used to classify assets by their corresponding class. For example, Euro uses ISO 4217 standard and has official code of EUR, Euro is identified by its code by all SWIFT members. But there is also ISO 10962, ISIN standard, 12-digit alphanumeric code that is used to classify and specify a security. It is currently unknown about the state of classification of different Cryptocurrencies by the aforementioned standards. What is a direct result of this problem is current legal battle between SEC and member of ISO 20022 standards body, Ripple.
Based on this classification, across all the SWIFT membership countries, different laws apply. For example, if a Cryptocurrency will be classified by ISO 4217 it would mean that it should be considered a normal currency by all organizations that use ISO standards, but if a crypto is classified by ISO 10962 standard, it would fall in securities bracket.
So when will we know?
Probably by the time ISO 20022 standards will be implemented which is approximately March 2023.
I'm not a financial advisor, none of information in this article should be considered a financial advice.
Its only my thoughts and opinions I wanted to share with this wonderful community.
