BOJ experiments with on-chain interbank and securities settlement

The Bank of Japan (BOJ) has begun technical experiments using blockchain technology to test the settlement of deposits held at the central bank, marking a significant step in its exploration of distributed ledger systems within core financial infrastructure.

In a speech titled “The New Financial Ecosystem and the Role of Central Banks,” BOJ Governor Kazuo Ueda confirmed that a sandbox project is underway to evaluate settlement using central bank money in the form of current account deposits — funds that financial institutions hold at the BOJ — on a blockchain-based system. The initiative is designed as a controlled technical trial rather than a policy rollout, with support from external experts.

A key focus of the sandbox is interoperability. The BOJ is studying how blockchain systems could connect with its existing settlement infrastructure, particularly the Bank of Japan Financial Network System (BOJ-NET).

The experiments will examine use cases such as domestic interbank transfers and securities settlement, while exploring whether insights from distributed ledger technology could enhance the efficiency and design of existing systems.

Ueda also highlighted both the opportunities and risks of integrating emerging technologies into financial plumbing. While combining blockchain and artificial intelligence could unlock new services built on real-time transaction and settlement data, he cautioned that poorly designed smart contracts could pose risks to financial stability and payment systems.

The sandbox initiative arrives as Japan continues refining its broader digital asset framework. Regulators have been reviewing token classifications under financial law, stablecoin adoption has advanced under revised legislation, and the government’s “New Capitalism 2025” strategy positions digital infrastructure and tokenization as pillars of economic growth.

Taken together, the BOJ’s blockchain settlement experiments suggest Japan is not only regulating digital assets but actively examining how distributed ledger technology could reshape the architecture of central banking itself — carefully, but deliberately.