Japan Targets 24/7 Blockchain Settlement for Stocks and JGBs in 2030s

Key Takeaways:

• Japan is aiming to explore the framework of blockchain technology for near-real time settlement of stocks and JGBs.
• Possible supporters of the initiative might include the FSA, the Finance Ministry, the BOJ and financial institutions.
• Some sort of development plan is expected by the end of 2027, and the operations could begin in the 2030s.

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Japan is ready to venture into the world of blockchain technology for a major makeover of its financial market infrastructure. The new arrangement would enable stock and Japanese government bond dealing to settle immediately, with the possibility of going 24-hours a day.

According to an Aug. 26 report from Nikkei, Japan is preparing a study group involving the Financial Services Agency, Ministry of Finance, Bank of Japan and financial institutions.

The group’s task is to consider ways blockchain might help facilitate instant settlement for publicly traded stocks and Japanese government bonds. As early as the start of 2027, a development plan could be drawn up.

The strategy would include a blueprint for the blockchain architecture, their responsibilities, and a roadmap for implementation, including both private and public entities. Once formally approved, the infrastructure may start operation in several years, with the launch either in the early 2030s or in the late 2030s.

The settlement system for big markets, such as for securities, is delayed settlement at present in Japan. The trading of stocks typically finishes after two business days following the trade, whereas Japanese governmental bonds settle after the day of trading.

The transfer of securities and money could be brought together by a blockchain system. It goes without saying that investors would likely get around faster with proceeds from the asset sales and redeploy their funds without having to go through the current settlement cycle.

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The project is also following the current research that the Bank of Japan is doing in this area. The central bank has been exploring settlement, specifically through the use of current-account deposits in commercial banks’ blockchain infrastructure. Potential applications for interbank transfers and securities transactions are included.

One major idea is delivery versus payment in which the delivery of an asset and the acquisition of the payment occur at the same time. This would lead to the shrinkage of the time lag for trading and getting cash in financial markets.

The private sector in Japan is also building financial platforms that integrate blockchain technology, such as tokenized securities and digital payments. These projects offer a testbed, as regulators debate what the potential relationship with the nation’s financial system should be.

Government effort to be reported is in the study phase. The technology, governance structure and implementation trajectory should be clearer in the next big development milestone, the technology design in plan to be around early 2027.

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