Crypto Assets Seek Global Standards for Seamless Integration

Standardization is essential to enable the widespread adoption of cryptocurrencies and digital assets. Traditional financial markets, such as stocks, bonds, and commodities, have long benefited from well-established standards that govern the flow of information and data. These standards ensure seamless trading, settlement, and regulatory compliance, providing a consistent framework for all participants.

As the financial industry transitions into decentralized finance (DeFi) with the introduction of digital assets like crypto assets and tokenized securities, the lack of such standards poses a significant challenge. While digital assets hold transformative potential, their fragmented information landscape risks undermining their adoption and integration into the broader financial ecosystem.

Independent platforms like CoinMarketCap and CoinGecko provide information on various tokens, but the data varies significantly regarding market capitalization, total supply, and other relevant reference data. Several global initiatives by private foundations and associations are working toward standardization to address these issues.

Just as standardized financial data has been instrumental in building trust and facilitating growth in traditional markets, digital assets need their global standards. For traditional assets, a clear hierarchy exists under the International Organization for Standardization (ISO) to unambiguously categorize and identify each asset. The International Securities Identification Number (ISIN) is the global standard for uniquely identifying all types of financial instruments, including equities, debt, derivatives, and indexes. The Certification of Financial Instruments (CFI) is the internationally recognized system for classifying financial instruments, defined when a financial or reference instrument is issued and remains unchanged. The Financial Instrument Short Name (FISN) outlines a standardized approach to short names and descriptions for financial instruments, providing a short format for key information about security for human use.

National Numbering Agencies (NNA) are responsible for collecting registration data such as issuer information, instrument types, terms, and trading conditions, and assign ISIN, CFI, and FISN. The Association of National Numbering Agencies maintains the identifiers and data in a global database. For countries without an NNA, four global Substitute Numbering Agencies assign identification. ISINs are allocated to financial instruments regardless of the technology used for creating the respective instruments, including tokenized instruments such as crypto securities. For tokens with an apparent geographical reference, the responsible NNA will allocate the ISIN. For tokens for referential instruments without an apparent geographical reference, such as Bitcoin (BTC), an ISIN with the prefix “XT” is allocated from Etrading Software.

This helps to identify the instrument on the token level. More exemplary data fields on the token level are the type of token, hash function, and generation mechanism. Focused on the instrument level, additional data elements like the token’s blockchain are needed. For this purpose, the Digital Token Identifier Foundation, which is responsible for allocating this new identifier, provides the so-called Digital Token Identifier — e.g., DTI, ISO 24165.

Crypto identifiers could become mandatory, similar to traditional assets using systems like ISINs. Digital assets will adopt unique identifiers for cryptocurrencies and tokenized securities, facilitating tracking, trading, and reporting across exchanges and custody providers. This will enable seamless integration with legacy financial systems.

Data standards will enhance transparency and compliance. With increasing regulatory scrutiny, standardized data formats will emerge for compliance and risk management. Global coordination will drive interoperability, relying on collaboration among regulatory bodies and financial institutions. International organizations will play pivotal roles in creating frameworks that ensure interoperability across jurisdictions and reduce market fragmentation and inconsistencies in information handling.

Initial steps have been taken toward unambiguously identifying digital assets with generally accepted ISO identifiers. Combined with a European Union-wide regulation such as the regulation on Markets in Crypto-Assets (MiCA), the industry lays the foundation for more significant adoption. It remains to be seen how investors and the digital assets player will further progress toward more standardization and what roadblocks may arise to be solved.