Japan’s Financial Services Agency held the first meeting for fiscal year Reiwa 8 of its Study Group on Responses to Digital and Decentralized Finance on Oct. 20, taking up legal questions tied to stablecoins, asset tokenization and decentralized exchanges, or DEXs. According to materials released by the agency, Japan still has no example of book-entry securities — including government bonds, corporate bonds, investment trusts and stocks — being traded on-chain, and the tokenization approach pursued by the U.S. Depository Trust & Clearing Corporation, or DTCC, would be difficult to transplant under Japan’s current laws.
Study group covers stablecoins, tokenization and DEXs
The study group stems from the FSA’s “financial strategy to promote growth investment,” published on July 21. In that strategy, the agency proposed an “on-chain finance initiative focused on the AI era,” along with one forum and two study groups. This group is tasked with work on the legal and operating environment, reviewing three areas: the framework for stablecoins, rules for tokenization across asset classes, and risk controls for decentralized finance, including DEXs and wallet operators.
The forum is scheduled to hold its second meeting in early 2027 and present an interim summary together with a public-private cooperation roadmap.
The study group is chaired by Hideki Kanda, professor emeritus at the University of Tokyo. Its members are mainly legal scholars, economists and lawyers. At the first meeting, Nomura Holdings and Securitize Japan gave presentations. The Bank of Japan, Japan Exchange Group and the Japan Securities Depository Center, or JASDEC, which handles centralized custody for stocks, attended as observers.
Tokenized assets top $35 billion globally, while Japan’s security tokens remain centered on real estate
The secretariat cited RWA.xyz data showing cumulative issuance of tokenized assets worldwide had exceeded $35 billion as of July 2026.
In Japan, domestic security tokens, or STs, are still concentrated mainly in real estate. The materials said tokenization of investment trusts has been slow because the Investment Trust Act requires the issuance of physical beneficiary certificates. An industry alliance whose secretariat is handled by Progmat submitted a proposal on April 7 to amend the Investment Trust Act so that physical certificates would no longer be required.
Why Japan cannot easily copy the DTCC structure
In Japan, rights to securities such as stocks and corporate bonds are determined through the book-entry transfer system. Ownership is based on records in the transfer ledger. For transfer institutions, the Bank of Japan is responsible for government bonds, while JASDEC handles other securities, with securities firms and other account management institutions maintaining layered records beneath that structure.
The secretariat listed three issues that would need to be addressed if the transfer ledger were managed on blockchain, or a distributed ledger:
- how responsibility and regulatory oversight would be divided once participants share a single ledger;
- how the role of account management institutions and personal data protection would need to change if the transfer institution could directly see each investor’s holdings;
- and how on-chain transfer procedures would connect with the current system.
The materials also compared Japan’s framework with DTCC’s. After receiving a no-action letter from the U.S. Securities and Exchange Commission in 2025, DTCC launched its tokenization project and plans to formally roll out tokenized services in October 2026. Under the structure summarized by the secretariat, participants move the rights they want tokenized from their own accounts into a “digital omnibus account” and lock them there. An equal amount of tokens is then minted into the participants’ wallets. Those tokens can later move on-chain, while the total amount in the omnibus account remains unchanged.
The problem, the materials said, is that the holding structures in the two countries are different. The United States uses an indirect holding model, where DTCC itself is the nominee holder of the securities and participants hold securities entitlements against DTCC. Japan uses a direct holding model, where rights belong directly to investors. The secretariat said Article 12, Paragraph 2 of Japan’s book-entry transfer law limits the purposes for which a transfer institution may open its own account, making it difficult under current law to establish a digital omnibus account like DTCC’s.
The materials also summarized the SEC’s statement on tokenized securities issued on Jan. 28 this year. That statement divides tokenized securities into two broad categories: issuer tokenization and third-party tokenization. The latter is then split into custodial and synthetic forms, with synthetic structures including linked securities or security-based swaps. DTCC’s model falls into the third-party custodial category.
Nomura, Daiwa and three major banking groups are testing on-chain settlement
The FSA also pointed to its Payment Innovation Project, or PIP, which was set up under its fintech proof-of-concept center in November 2025. The project currently supports four cases. The first is a joint yen stablecoin issuance by three major banking groups.
The second is an on-chain securities settlement experiment that the FSA decided to support on Feb. 13, 2026. Participants include Nomura Securities, Daiwa Securities and three major banking groups. The work examines payment using stablecoins and other instruments, along with delivery versus payment, or DvP, for securities on-chain. As part of that effort, Mizuho Financial Group and others began a trial in April, and Mitsubishi UFJ Financial Group and others began another in August, each focused on putting Japanese government bond collateral transactions on-chain.
The secretariat said that if on-chain DvP can be achieved, it could enable immediate transfer, reduce settlement risk and lighten operational workloads. It also said the model could eventually support securities trading 24 hours a day, 365 days a year, and attract more investors, including overseas investors.
Three questions put to members
At the end of the meeting, the secretariat asked members to discuss three points: which legal area should be handled first from the standpoint of promoting innovation and protecting investors; which legal issues should be examined in depth across four themes — stablecoins and deposit tokenization, security tokens, DEXs and DeFi, and the book-entry transfer system; and what should be kept in mind if tokenization and on-chain finance lead to a further shortening of securities settlement cycles.