Bank of Japan Tests Blockchain for Deposit Settlement

Crypto News

The Bank of Japan has launched a sandbox project to test whether blockchain technology can be used to settle deposits held by financial institutions at the central bank. BOJ Governor Kazuo Ueda announced the initiative in a Tuesday speech titled “The New Financial Ecosystem and the Role of Central Banks.”

The project centers on settling current central bank account deposits through systems that use distributed ledger technology. Ueda said the BOJ will proceed with support from external experts, framing the work as a controlled technical test rather than a policy change.

A key focus of the sandbox is how blockchain-based settlement systems can connect with the BOJ’s existing infrastructure, including the Bank of Japan Financial Network System, known as BOJ-NET. Ueda said findings from the experiments may be used to improve BOJ-NET, and that the work will examine use cases such as domestic interbank settlement and securities settlement.

Ueda also addressed the potential integration of artificial intelligence with blockchain, noting that combining the two technologies could support enhanced financial services built on transaction and settlement data recorded across distributed systems. The governor added that insights from the project may inform future upgrades to existing settlement architecture.

At the same time, Ueda flagged design risks tied to smart contracts. “When the design of the smart contracts is inadequate, however, there is a risk that the stability of financial markets and payment systems will be threatened,” he said. SmartContracts carry binding execution logic, meaning errors in their code can trigger unintended financial outcomes at scale.
The sandbox initiative sits within a broader push by Japan to develop its digital assetframework. The Financial Services Agency held public consultations in 2025 on reclassifying certain tokens under the Financial Instruments and Exchange Act, a move that could bring select digital assets under securities-style rules covering disclosure and market conduct.
The government has also framed blockchain and tokenization as components of its “New Capitalism 2025” growth strategy, positioning digital infrastructure as part of a broader financial modernization drive. On the private sector side, Japan launched its first yen-backed stablecoin in October 2025, issued by JPYC under the country’s revised Payment Services Act, which classifiesstablecoins as electronic payment instruments.

Sony Bank and JPYC signed a memorandum of understanding on Monday to study a system that would allow bank customers to purchase yen-backed stablecoins directly from their accounts through real-time transfers. The BOJ sandbox and these private-sector developments reflect parallel tracks of digital infrastructure expansion underway across Japan’s financial system.

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