Japan Tackles Blockchain Settlement for Stocks and Government Bonds

Japan's financial authorities are planning to examine a blockchain-based settlement infrastructure for stocks and government bonds, aiming for real-time, round-the-clock settlement. The Financial Services Agency, Ministry of Finance, Bank of Japan, and local financial institutions will establish a study group this summer to design the system's technical structure and divide responsibilities among participating agencies.

The group hopes to formulate a development plan by 2027. If approved, the project could take several years to build, with operations potentially beginning in the early 2030s. Under the proposed structure, a portion of commercial banks' reserve accounts at the Bank of Japan would be converted into digital tokens circulating on the new infrastructure.

The current settlement cycle in Japan takes one to two business days to finalize trades after execution. A move to real-time settlement would put Japan ahead of its previous benchmarks. The scale involved is substantial, with Japan holding approximately ¥1,166 trillion ($7 trillion) in outstanding government bonds and bills, while the Tokyo and Nagoya exchanges processed a combined ¥3.39 quadrillion in trading volume last fiscal year.

The study group builds on existing work at Japan's largest banks, which have been running blockchain-based collateral trials for JGBs since April. Regulatory changes are also underway, with amendments reclassifying around 105 cryptocurrencies as financial instruments starting in fiscal 2027 and the FSA creating a dedicated cryptocurrency division.