Japan is set to develop a real-time settlement system for stock and government bond transactions using blockchain technology. Authorities aim to have a project plan ready by early 2027, according to Nikkei.
Instant Settlements
The initiative will involve the Financial Services Agency (FSA), the Ministry of Finance, the Bank of Japan, and various financial sector representatives. This summer, they plan to form a working group to outline the blockchain system's architecture, define responsibilities among participants, and establish a development roadmap.
If the project receives final approval, the infrastructure could be operational by the early 2030s.
Currently, stock settlements in Japan take place two days after a trade, while settlements for Japanese government bonds occur the following day. The blockchain system aims to eliminate these delays, allowing sellers to receive funds and reinvest almost immediately post-transaction.
Ongoing Blockchain Trials
This is not Japan's first foray into blockchain technology within its financial market. In February, the FSA announced its support for a demonstration project that would register rights to government and corporate bonds, mutual funds, and stocks on a blockchain, with settlements conducted in stablecoins.
The Bank of Japan is also experimenting with the use of tokenized central bank reserves for blockchain settlements, considering scenarios that include securities transactions.
This new initiative could elevate these experiments to a national infrastructure level. In the future, Japanese authorities are also contemplating using the system for international transfers.
Nikkei noted that the U.S. and Europe are at the forefront of real asset tokenization, raising concerns that foreign investors and funds might turn away from Japanese securities markets if the country's technology lags behind.
The total size of the Real World Asset (RWA) segment (excluding stablecoins) stands at $38.3 billion, with $15.6 billion attributed to U.S. government bonds.
Source: RWA.xyz.Additionally, it has been projected in the UK that tokenization could contribute up to £33 billion annually to the economy over the next decade.