The Bank of Japan (BOJ) is testing the use of blockchain technology for central bank settlements, marking a practical step towards integrating distributed ledger systems into core financial infrastructure.
According to a report by The Block, Governor Kazuo Ueda told the FIN/SUM conference in Tokyo that central banks must adapt to what he described as a “new financial ecosystem”, where tokenisation, programmability and blockchain-based settlement could reshape payments and securities markets.
While stressing that the BOJ remains cautious, Ueda confirmed the bank will experiment with its current account deposits, the reserves held by financial institutions at the central bank.
He said the BOJ is developing a sandbox project to assess whether central bank money can function within blockchain-based systems.
Such trials could improve the efficiency of interbank transfers and securities settlement, particularly if combined with smart contracts enabling faster execution.
Ueda said the BOJ would work with external experts while examining potential use cases, including domestic interbank and securities settlement, and exploring how new systems could connect with existing infrastructure.
The BOJ’s efforts align with wider international initiatives, including Project Agora led by the Bank for International Settlements.
The project brings together multiple central banks to explore cross-border wholesale settlement using tokenised central bank money. Japan is among the participating jurisdictions.
Ueda added that the BOJ continues to run a pilot programme for a possible retail central bank digital currency (CBDC).
The bank is testing the core infrastructure of a CBDC system. It is also consulting private sector participants through a dedicated forum.
The forum will be reorganised in its next phase to broaden discussions beyond technical design, although no timeline was provided.
The remarks come as Japan’s crypto regulatory framework continues to develop, with Finance Minister Satsuki Katayama recently expressing support for closer integration of crypto assets into the traditional financial system.
Featured image credit: Edited by Fintech News Hong Kong, based on image by sanjit536 via Freepik
