Ministry of Finance Launches On-Chain Research Group for Instant Bond Settlement

Key Points of This Article

• Composed of researchers from the University of Tokyo and Waseda University, along with private sector strategists
• Involves the Bank of Japan and the Financial Services Agency to organize discussion points by the end of the year

Examining Instant Settlement of Bond Transactions

On the 30th, the Ministry of Finance announced the establishment of a "Research Group on On-Chain Solutions" with the aim of instant settlement of bond transactions, as reported by Reuters. The first meeting will be held on October 8.

Currently, the practice for bond trading involves the transfer of funds and bonds on the next business day after the agreement. The research group will compare this current trading practice with the potential benefits and drawbacks of transitioning to instant settlement on a blockchain.

On-chain settlement refers to a system where the transfer of assets such as bonds and the corresponding payments are completed on the blockchain. This allows for the possibility of completing the settlement simultaneously with the transaction, eliminating the time lag until the next business day.

Participation of Academics and Financial Authorities

Members of the research group include Professor Takahito Kato and Professor Akira Kake from the University of Tokyo, and Associate Professor Junosuke Shino from Waseda University. From the private sector, they have invited Chotaro Morita, Chief Strategist at All Nippon Asset Management and representative of Walls & Bridges, to help organize the challenges related to on-chain solutions.

The secretariat will be managed by the Ministry of Finance, with discussions also involving the Bank of Japan and the Financial Services Agency. According to officials from the ministry, there are already products in the U.S. that allow for trading bonds as underlying assets on the blockchain through money market funds (MMFs). The Ministry of Finance plans to reference such cases and organize discussion points by the end of the year.

Financial Services Agency Also Initiates On-Chain Finance

On the same day, the Financial Services Agency held its first meeting of the "On-Chain Finance Forum for the AI Era." This initiative aims to begin discussions on the social implementation of on-chain finance in collaboration with relevant ministries, including specific measures such as on-chain solutions for Bank of Japan current accounts.

Regarding the utilization of blockchain for bond settlement, the Nihon Keizai Shimbun reported in August that the Financial Services Agency, the Ministry of Finance, and the Bank of Japan would establish a study group involving financial institutions in the summer of 2026, with plans to compile a framework for instant settlement of bonds and stocks by early 2027. In the private sector, MUFG announced in August a demonstration of on-chain bond repo transactions and is considering the use of tokenized deposits and stablecoins as settlement methods.