Japan explores blockchain technology to accelerate securities settlement transactions

Japan explores blockchain technology to accelerate securities settlement transactions

Japanese authorities are set to examine blockchain-based infrastructure that would allow instant cash settlement for equities and sovereign debt trades.

According to reports, Japan is moving forward with preparations for a blockchain-powered platform designed to facilitate instant cash settlement of equity and Japanese government bond trades around the clock.

A study group comprising the Financial Services Agency, Ministry of Finance, Bank of Japan (BOJ) and various financial institutions is scheduled to be formed this summer, as Nikkei reported on Wednesday.

The working group's mandate will include determining the construction methodology for the blockchain-based infrastructure, allocating responsibilities among public agencies and financial institutions, and creating a comprehensive development roadmap by approximately the beginning of 2027.

Should the initiative receive formal approval, operational launch of the system could occur in the early 2030s.

Under the envisioned framework, a portion of deposits that banks maintain in BOJ current accounts would be transformed into digital tokens capable of moving across the blockchain network for settlement between banks.

Currently, standard equity transactions in Japan complete settlement on T+2, whereas domestic government bond transactions complete settlement on T+1.