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Japan Wants Blockchain for Stock and Bond Settlement

The BOJ and major banks are testing digital tokens for faster settlement of stocks and JGBs. The project fits into Japan’s broader push toward tokenization and CBDC infrastructure.

By Zenz van der Wielen
• 2 min read
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Japan Wants Blockchain for Stock and Bond Settlement

Key Takeaways

  • Japanese regulators, the Bank of Japan, and major financial institutions are working on a national blockchain infrastructure for settling stocks and Japanese government bonds.
  • Banks would convert reserve accounts at the BOJ into digital tokens, allowing settlement between financial institutions to move faster.
  • If approval and testing go well, the new onchain system could go live in the early 2030s.

Japanese regulators, the Bank of Japan, and major financial institutions are working on a national blockchain infrastructure for settling stocks and Japanese government bonds. According to Nikkei, a working group is set to launch later this year, with the goal of starting work in early 2027. If everything is formally approved and the tests go well, the new onchain system could go live in the early 2030s.

Digital Tokens for Settlement

The plan is for banks to convert part of their reserve accounts at the BOJ into digital tokens. These would function as a wholesale central bank digital currency, meaning a digital version of the local currency used only between financial institutions. Nothing would change for everyday Japanese users when it comes to using money, but for settlement between banks, this could speed up the process significantly.

Right now, stocks in Tokyo are settled two business days after execution. Japanese government bonds are settled the next day. With the new infrastructure, that would be cut to almost zero, allowing investors to reinvest proceeds almost immediately.

BOJ Has Been Testing for a While

The Bank of Japan has been testing blockchain for settlement for some time. In March, the central bank expanded its sandbox, a sealed-off test environment for interbank payments and securities settlement, to keep working on CBDC and blockchain projects. That environment runs through 2028 and is also meant to show how new systems can work with existing interbank and securities infrastructure.

Major Japanese banks are also already running pilots. MUFG said earlier this month that it is preparing a proof of concept for onchain settlement of Japanese government bonds via the Canton Network. MUFG, SMBC, and Mizuho are also already running a pilot with tokenized stocks and JGBs.

Why This Matters

The move fits into a broader race to modernize capital markets with tokenization. In the US and Europe, work is already underway on faster and more continuous trading, while Wall Street is moving toward 24/7 tokenized stocks. For Japan, another factor is that the country has a large and aging financial sector, which makes more automation in back-office processes increasingly important.

Japan’s bond market, worth about $7 trillion (€6 trillion), could become more efficient and transparent through blockchain settlement. At the same time, a recent survey by Nomura and Laser Digital shows that nearly 80% of Japanese institutional investors want to include crypto in their allocation within three years. That increases the pressure on Japan to modernize its market infrastructure faster than other countries.

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