Jan. 26, 2023
Brian Armstrong, the CEO of crypto exchange Coinbase, recently made a surprising announcement.
In it, he stated that Coinbase Wallet – the DeFi software wallet managed by the popular exchange — would be dropping support for a number of cryptocurrencies.
Coinbase cited “low usage” as the reason for delisting the four coins. This makes little sense as it requires almost no programming work to continue to offer wallet support for an existing cryptocurrency.
DeFi wallets support thousands of crypto assets, many of which are virtually worthless. Since all of the trading is executed on decentralized exchanges, Coinbase doesn’t have to meet any liquidity demands. They don’t really have to do anything.
In fact, the whole purpose of a DeFi wallet is its ability to hold just about any cryptocurrency in existence.
So why do I think they are delisting these assets?
Two of them are fully compliant with ISO 20022 and I think it’s quite likely that the banks don’t want people owning them.
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ISO 20022 is the new global standard for financial messaging (electronic data interchange (EDI) messages used in the financial industry). It provides a consistent way for financial institutions to exchange data, such as payment instructions and account information, between systems and networks.
It is designed to be flexible and adaptable, allowing for the integration of new technologies and business processes. It is also designed to support multiple languages and character sets. It is being adopted globally by central banks, financial institutions and companies for their financial messaging infrastructure.
ISO 20022 seeks to fundamentally change how banks communicate. And blockchain and crypto are a big part of this interoperability.
The European Central Bank (ECB) is currently planning on implementing ISO 20022 in March 2023. The European Banking Authority (EBA) Clearing and SWIFT are both on board with most banks prepared to migrate immediately.
Thailand, Malaysia and Singapore have already migrated to ISO 20022. Australia and New Zealand plan to go live in March along with Europe.
As part of the migration, SWIFT plans to introduce a centralized transaction management platform, which will be used by all SWIFT users. The platform will coordinate end-to-end transactions, replacing the point-to-point messaging currently in use. The first interbank message in the payment chain will generate a copy of the transaction, which will then be updated with each subsequent message according to strict data integrity rules. This will lead to improvements in the integration of end-to-end transactions, which is the main driver of the platform's introduction.
“The ISO 20022 migration is much more than just a new messaging format, it is the start of an entirely new era for payments.”
—Joey Han, Clearing Solutions Specialist, APAC, Institutional Cash Management at Deutsche Bank
For all the people who think crypto has no utility, ISO 20022 means distributed ledger (or blockchain) technology is currently being implemented for electronic data interchange between financial services as well as global payments.
The US is planning to fully transition to ISO 20022 by November 2023. Banks will have to upgrade their messaging systems to be compatible once this transition is complete.
All of this is in preparation for widespread rollouts of central bank digital currencies (CBDCs). This overhaul of the ISO system will be required to allow easy cross-border payments using these new digital currencies as well as the tokenization of various assets.
This is just the beginning.
SWIFT, a global provider of financial messaging services, has announced a groundbreaking innovation that sets the stage for the widespread use of central bank digital currencies (CBDCs) and tokenized assets. The new solution, known as the Global Payments Innovation (GPI) Token, will enable the secure and efficient movement of these digital assets on the SWIFT network.
This new technology will provide a way for financial institutions to exchange CBDCs and tokenized assets in a safe and seamless manner. By leveraging the existing infrastructure of the SWIFT network, which connects over 11,000 financial institutions in every country in the world, the GPI Token will make it possible for these digital assets to be used globally.
The GPI Token will also enable the efficient tracking of digital assets as they move across the network. This will help to ensure that transactions are conducted in a transparent and accountable manner, while also providing a high level of security.
The development of the GPI Token is a significant step forward for the financial industry, as it paves the way for the widespread adoption of CBDCs and tokenized assets. This new technology has the potential to revolutionize the way that financial institutions conduct business, by providing a faster, more secure, and more efficient means of exchanging digital assets.
SWIFT has been developing this since at least 2017.
Tokenization is the process of converting the rights to an asset, such as real estate, art, or stock, into a digital token on a blockchain.
These tokens represent ownership or a proof of interest in the underlying asset and can be bought, sold, or traded like any other digital asset. Tokenization allows for the creation of fractional ownership of assets, which can make investing in them more accessible to a wider range of people.
Additionally, tokenization can also enable assets to be more easily traded and transferred.
The use of blockchain technology in tokenization also provides a secure and transparent way to track and manage ownership and transactions of these assets.
Central bank digital currencies (CBDCs) are digital versions of a country's fiat currency, issued and controlled by the country's central bank. These digital currencies can be used in the same way as physical cash and can be exchanged between individuals and businesses just like physical cash.
CBDCs are designed to improve the efficiency and stability of the monetary system, enhance the convenience and security of retail payments and provide a new means for implementing monetary policy.
CBDCs can be issued in two forms: account-based, where a central bank creates digital tokens that are recorded on an account held by a financial institution (what the banks will use), or value-based, where the central bank creates digital tokens that can be exchanged peer-to-peer without the need for intermediaries (what the people will use).
Unlike cryptocurrencies, CBDCs are issued and controlled by a central authority and are not decentralized.
CBDCs are still in the experimental phase, with some countries such as China and Sweden having already launched pilot tests. 90% of the world’s central banks are developing CBDCs with many having already launched.
While CBDCs may seem like a promising solution to improve the efficiency and stability of the monetary system, it is important to understand the potential dangers that come with them.
First, CBDCs could lead to a loss of privacy for individuals. With the ability for central banks to track and monitor all transactions made using CBDCs, individuals may be at risk of having their personal financial information shared without their consent. This could also lead to increased government surveillance and a lack of financial freedom.
A key feature of CBDCs is their programmability. This would allow central banks to put any sort of limits on the currency that they wish. For instance, they could control when and where you spend your money as well as how long you could hold it – even preventing people from saving or investing.
Such control could easily bring about total financial slavery.
Another danger of CBDCs is the potential for increased financial instability. With the ability for central banks to control the supply of CBDCs, they may be tempted to use this power to manipulate the economy. This could lead to inflation or deflation and ultimately result in negative effects on the economy.
Additionally, CBDCs could also pose a threat to the stability of the banking system. With the ability for individuals to easily transfer funds between banks using CBDCs, traditional banks may struggle to compete and could potentially become obsolete. This could lead to a concentration of power in the hands of a few large institutions and a lack of competition in the financial market.
Lastly, CBDCs could also have negative effects on monetary policy. With the ability for central banks to directly control the money supply, traditional monetary policy tools such as interest rate adjustments may become less effective. This could lead to a lack of flexibility in responding to economic changes and ultimately result in negative consequences for the economy.
While CBDCs may seem like a promising solution for the future of finance, it is important to understand the potential dangers that come with them. It is crucial for central banks and governments to carefully consider the potential risks and take measures to mitigate them before implementing CBDCs.
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SEC v. You
The SEC has a long-running lawsuit against the creators of one of the cryptocurrencies approved for use in implementing ISO 20022. In it, they claim that the token was being illegally sold as an unregistered security. In response, US crypto exchanges delisted it, making it very difficult for retail investors in America to purchase it.
It seems like someone doesn’t want you owning this crypto… at least in the United States.
This cryptocurrency was created to be a quick settlement platform between banks and other financial institutions. Not only is the token used as collateral for payments but also cross border transactions and currency conversions.
The second crypto can be utilized as a settlement medium for fiat conversion. It allows you to create and send digital representations of any kind of money. In fact, over 300 banks and financial service providers in over 45 countries use it for settlement. It’s also playing a key role in developing CBDCs.
I’ve dedicated an entire issue of Crypto Cycle to ISO 20022 where I outline these coins as well as other potentially compliant cryptocurrencies.
I also show you where you can purchase them — even if you’re in the US.
See the research here.
Editor, Daily Profit Cycle