Japan plans blockchain-based system for instant securities settlement

Japan explores blockchain for faster stock and bond settlements

Japan’s financial regulators, including the Financial Services Agency (FSA), Ministry of Finance, and the Bank of Japan (BOJ), are planning to create a blockchain-based system. This system aims to allow instant cash settlement for stock and Japanese government bond transactions at any time of day.

The group will include financial institutions and is set to begin studying the infrastructure this summer. A development plan is expected to be finalized by early 2027.

Key details of the proposed system

• A study group will be formed this summer to design the blockchain infrastructure.
• The system could convert bank deposits held in BOJ current accounts into digital tokens for interbank settlement.
• If approved, the system may start operating in the early 2030s.
• Currently, stock trades in Japan settle two business days after the trade (T+2), while government bonds settle the next business day (T+1).

What the study group will decide

The study group will determine how the blockchain infrastructure will be built and assign responsibilities among public agencies and financial institutions. The goal is to create a plan by early 2027.

What is confirmed

• Japan’s FSA, Ministry of Finance, BOJ, and financial institutions are planning to form a study group this summer.
• The group will explore a blockchain-based system for instant settlement of securities transactions.
• A development plan is expected by early 2027.
• Current settlement times for stocks and bonds in Japan are T+2 and T+1, respectively.

What is still unclear

• No final decision has been made on whether the system will be implemented.
• The exact timeline for the system’s launch, if approved, remains uncertain but is targeted for the early 2030s.
• Details about how the digital tokens will function or be regulated are not yet available.

Why this could matter for financial markets

If implemented, the system could reduce settlement times for securities transactions, making the process faster and more efficient. Blockchain technology, which is a digital ledger that records transactions securely and transparently, could also improve trust and reduce costs in financial settlements.

Sources

• Cointelegraph
• Nikkei