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Japan is studying whether to move the settlement of stocks and government bonds onto blockchain infrastructure capable of running in real time around the clock in a project involving the Financial Services Agency, the Ministry of Finance, the Bank of Japan, and the country’s three largest banks
It is the sort of institutional endorsement tokenisation advocates have been arguing for since long before JPMorgan started filing tokenised funds on Ethereum.
The current cycles are what the plan is aimed at. Japanese equities settle in two business days and government bonds in one, which is the global norm and also a window in which counterparty risk sits on someone’s books.
The mechanism under consideration is more interesting than the headline. Portions of the balances banks hold at the Bank of Japan would be converted into digital tokens on a blockchain network, making this an interbank central bank digital currency rather than anything consumers would touch.
That distinction matters because retail CBDCs have run into political resistance in several countries over surveillance and disintermediation concerns. A wholesale system moving money between institutions that already hold central bank accounts avoids nearly all of that argument.
A study group forms immediately, a development plan is expected in early 2027, and operational launch is targeted for the early 2030s, with the project possibly folded into a multi-year strategic investment framework starting in fiscal 2027.
Five or six years is a long time in this field, though it is a fairly normal timeline for replacing the plumbing under a national securities market. Settlement infrastructure is the sort of thing that has to work on the first day and every day afterwards.
Instant settlement is not costless either, and that is the part these announcements tend to skip. Compressing the cycle to zero removes netting, which means firms need the full cash and securities available at the moment of trade rather than at the end of a batch, and the liquidity demands rise accordingly.
The competitive motivation is stated plainly. Officials want to keep Japanese markets competitive as the United States and Europe build out tokenised securities infrastructure, which is a defensive framing rather than an ambition to lead.
The domestic system could serve as a foundation for international payment applications through the Bank for International Settlements blockchain pilots that already involve Japan, Europe, and other jurisdictions.
Cross-border settlement is where the economics are genuinely compelling. Correspondent banking is slow and expensive precisely because it chains together national systems that were never designed to talk to each other, and a shared ledger removes several of those links.
Japan has formed here, having run digital currency experiments through the Bank of Japan for several years without committing to a retail launch. Moving to wholesale settlement is a narrower and more tractable version of the same ambition.
Japan’s government bond market is among the largest in the world, which makes the choice of asset class a statement in itself. This is not a pilot on a peripheral instrument but a proposal to rebuild settlement for the securities that anchor the country’s financial system.
Europe has been moving on the same terrain from a different direction, with infrastructure rather than assets increasingly seen as the phase of tokenised finance that matters. Japan proposing to tokenise central bank money rather than the securities themselves is a version of that argument.
The FSA has been busy on the less flattering side of this sector as well, having asked cryptocurrency exchanges this month to tighten anti-fraud measures against investment and romance scams. Institutional tokenisation and consumer crypto enforcement are running on parallel tracks, as they tend to.
Nothing has been decided. A study group is the earliest formal stage a Japanese policy initiative can occupy; no technology has been selected, and the plan reported by Nikkei has not been published by any of the agencies involved.
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Source: thenextweb.com