Bank of Japan Explores Blockchain for Central Bank Settlements

The Bank of Japan (BOJ) is set to embark on technical experiments utilizing blockchain technology to facilitate the settlement of deposits held by financial institutions at the central bank. According to Cointelegraph, BOJ Governor Kazuo Ueda announced this initiative in a speech titled “The New Financial Ecosystem and the Role of Central Banks.” The project involves a sandbox environment to test the settlement process using central bank money in the form of current account deposits on a blockchain-based system. The experiments aim to explore methods of integrating with existing systems and examine potential use cases, such as domestic interbank and securities settlements. The focus is on settlements using central bank current account deposits, which financial institutions maintain at the BOJ. Ueda emphasized that the BOJ will proceed with the assistance of external experts, framing the initiative as a controlled technical test rather than a policy implementation. The sandbox will also investigate interoperability with current systems, including the Bank of Japan Financial Network System (BOJ-NET), with insights potentially contributing to BOJ-NET improvements. Ueda highlighted the potential of integrating artificial intelligence and blockchain to enhance financial services through transaction and settlement data recorded on distributed systems. However, he cautioned about the risks associated with smart contract design, noting that inadequate design could threaten the stability of financial markets and payment systems. This initiative coincides with Japan's efforts to refine its digital asset regulatory framework. In 2025, the Financial Services Agency conducted public consultations on reclassifying certain tokens under the Financial Instruments and Exchange Act, potentially subjecting select digital assets to securities-style disclosure and market conduct rules. The Japanese government has also positioned blockchain and tokenization as integral to its “New Capitalism 2025” growth strategy, emphasizing digital infrastructure as a key component of financial modernization. Additionally, Japan is advancing stablecoin integration at the private sector level. On October 27, 2025, JPYC launched the country's first yen-backed stablecoin under the revised Payment Services Act, recognizing stablecoins as electronic payment instruments. Furthermore, on March 2, Sony Bank and stablecoin issuer JPYC signed a memorandum of understanding to explore real-time transfers, enabling customers to purchase yen-backed stablecoins directly from bank accounts.