Japan is considering a blockchain-based settlement system that would allow cash legs of stock and Japanese government bond trades to be completed immediately at any hour of the day. According to a Wednesday report by Nikkei, the Financial Services Agency, the Ministry of Finance, the Bank of Japan and private financial institutions plan to launch a study group this summer to examine how the infrastructure should be built.
The group is expected to map out the structure of the blockchain network, assign responsibilities between public bodies and financial institutions, and produce a development plan by early 2027. If the proposal wins formal approval, the system could start operating in the early 2030s.
Under the proposal, part of the deposits that banks keep in current accounts at the Bank of Japan would be turned into digital tokens for use on the blockchain in interbank settlement. The move is aimed at speeding up settlement compared with Japan’s current timetable, where regular equity trades settle on T+2 and domestic government bond trades settle on T+1.
Japan is studying a blockchain-based system designed to enable immediate cash settlement for stock and Japanese government bond transactions at any time of day.
According to a Wednesday report by Nikkei, the Financial Services Agency, the Ministry of Finance, the Bank of Japan and financial institutions plan to set up a study group this summer to examine the required infrastructure.
Study group to outline the infrastructure plan
The group is expected to decide how the blockchain-based infrastructure should be built, split responsibilities between public agencies and financial institutions, and produce a development plan in early 2027.
If the plan receives formal approval, the system could begin operating in the early 2030s.
Part of BOJ account deposits could be tokenized
Under the proposal, some of the deposits that banks hold in Bank of Japan current accounts would be converted into digital tokens. Those tokens would circulate on the blockchain for interbank settlement.
Current settlement cycles remain T+2 and T+1
At present, regular equity trades in Japan settle on T+2, while domestic government bond trades settle on T+1.
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