The Need for Messaging Standards in Blockchain

As financial firms are compelled to deploy Blockchain technologies to satisfy client demand and to participate in market initiatives, many questions arise. According to a recent white paper produced jointly by SWIFT and Accenture, one of the main shortcomings of the technology, as applied to financial services, is the lack of data governance, especially in regard to messaging standards.

As the use of cryptocurrencies inevitably grows, treasurers will need to see a consolidated view of their traditional currency positions alongside the new ones. Incorporation of Blockchain transactions into legacy systems would require flexible data models and/or the use of adaptable integration tools throughout the firm. Integration across standard data models can be achieved rather easily by most interface applications. However, without defined standards for the cryptocurrency "wallets" of the Blockchain, how can integration be addressed?

In addition to internal requirements, established and emerging payment systems for the settlement of cryptocurrency transactions pose further challenges to financial firms. Given the lack of standards, such as ISO 20022 or published ACH protocols, how can a firm create valid payment messages in a Blockchain transaction? Considering the number of exchanges for the Bitcoin cryptocurrency alone, including Kraken, the German-based Bitcoin.de, and Coinbase, a firm would need to implement multiple protocols in order to support them. As with fiat currencies, take-up of additional cryptocurrencies such as Etherium, Litecoin, and Ripple, could add additional stress on a firm's IT department.

The financial industry poses unique demands for messaging and payments. This set of required data elements could prove problematic as Blockchain processes attempt to coexist with the operations of traditional markets. The established data dictionary in the ISO 20022 standard can be used as the basis for the Application Program Interfaces (APIs) upon which Blockchain integration is based, making interoperability possible. To aid in this effort, financial industry standards bodies, such as ISO (specifically TC68) and SWIFT should be engaged in developing and modifying messaging standards for Blockchain.