Japan Sets Sights on Blockchain-Based Settlement for Stocks and JGBs

Japan is set to explore the use of blockchain technology for near-real-time settlement of stocks and Japanese government bonds, aiming to launch operations in the 2030s. The initiative involves a study group consisting of the Financial Services Agency, Ministry of Finance, Bank of Japan, and financial institutions.

The current settlement system for big markets in Japan is delayed, with stock trading finishing two business days after the trade and Japanese government bonds settling after the day of trading. A blockchain system could bring together the transfer of securities and money, allowing investors to get their proceeds faster and redeploy their funds without going through the current settlement cycle.

The Bank of Japan has been researching settlement using blockchain technology, including through the use of current-account deposits in commercial banks' infrastructure. One potential idea is delivery versus payment, where the delivery of an asset and the acquisition of the payment occur simultaneously, reducing the time lag for trading and getting cash in financial markets.