Japan is reportedly preparing a blockchain-based system intended to allow the cash settlement of stock and Japanese government bond transactions to be completed immediately, at any time of day.

The Financial Services Agency (FSA), the Ministry of Finance, the Bank of Japan (BOJ) and financial institutions plan to establish a study group as early as this summer, Nikkei reported on Wednesday.

The study group is expected to decide how the blockchain-based infrastructure should be built, divide responsibilities between public agencies and financial institutions, and produce a development plan early in 2027, according to the report. If the plan is formally approved, the system could begin operating in the early 2030s.

How the system would work

Under the proposed design, some of the deposits that banks hold in their BOJ current accounts would be converted into digital tokens capable of circulating on a blockchain for interbank settlement. BOJ current accounts — the reserve balances commercial banks maintain at the central bank — form the backbone of Japan's interbank payment system, with transfers between institutions carried across the BOJ-NET, the central bank's own financial network.

By tying securities settlement more directly to this existing monetary infrastructure, the proposal would affect a core piece of market plumbing that sits behind equity and bond trading rather than the trades themselves. That is one reason the project is being explored jointly by regulators, the BOJ and market participants, since any change would need to fit both payment and securities settlement processes.

Current settlement timelines

Under existing arrangements, regular equity trades in Japan settle on a T+2 cycle, meaning delivery and payment take place two business days after the trade date, according to Japan Exchange Group. Domestic government bond trades settle on T+1, one business day after execution. The proposed blockchain infrastructure is intended to move beyond such calendar-based cycles by enabling around-the-clock settlement.

Part of Japan's wider digital money work

The initiative would extend Japan's official experimentation with digital money and financial market infrastructure. The BOJ has been running a pilot program for a central bank digital currency (CBDC) since April 2023 to test the technical feasibility of a digital yen, without committing to issuance. Japanese commercial banks have separately explored tokenized deposits — blockchain-based tokens representing claims on ordinary bank deposits — as a possible complement to existing settlement rails.

The plan also aligns with the Japanese government's broader promotion of Web3 and digital-asset businesses as part of its economic growth strategy, an effort that has included regulatory revisions covering stablecoins and crypto exchanges in recent years. For market infrastructure, the question is not only whether blockchain can be used, but how it can be integrated with existing systems in a way that preserves the roles of regulators, the central bank and private institutions.

Source: Cointelegraph