Japan central bank to test distributed ledger settlement

The Bank of Japan will run a blockchain sandbox to test settlement of central bank current account deposits held by financial institutions, focusing on domestic interbank and securities settlement. The central bank framed the project as a technical experiment rather than a policy change.

Governor Kazuo Ueda announced the initiative in a speech titled “The New Financial Ecosystem and the Role of Central Banks.” He said the experiments will test settlement using central bank money “in the form of current account deposits on a system that uses blockchains.” The work will explore practical use cases and how a distributed ledger would connect with the BOJ’s existing infrastructure.

The sandbox will study methods to link a blockchain-based platform with BOJ-NET, the central bank’s primary payments and settlement system. The tests will focus on technical feasibility, system architecture, connectivity and operational design, with support from external experts.

Officials plan to examine how an account-based central bank deposit could be represented and moved on a distributed ledger, and how such a platform would interoperate with current payment and securities systems.

Ueda noted the project may produce findings that could inform improvements to BOJ-NET. He also highlighted potential applications where transaction and settlement records on a distributed system could be combined with machine learning. “Integrating artificial intelligence and blockchain could enable enhanced financial services built on transaction and settlement data recorded on distributed systems,” he said.

The governor cautioned about risks tied to automated code. He warned that poorly designed smart contracts could threaten the stability of financial markets and payment systems, stressing the need for robust design and risk controls.

The sandbox complements broader regulatory work on digital assets in Japan. In 2025, the Financial Services Agency consulted on reclassifying certain tokens under the Financial Instruments and Exchange Act. The national government has included blockchain and tokenization in its “New Capitalism 2025” strategy as part of financial infrastructure planning.

Private-sector developments have advanced tokenized payments. On Oct. 27, 2025, a yen-backed stablecoin launched under revisions to the Payment Services Act that recognize stablecoins as electronic payment instruments. Sony Bank and the stablecoin issuer later signed a memorandum of understanding to study mechanisms that would let customers buy yen-backed stablecoins directly from bank accounts in real time.

The BOJ said the sandbox will be limited and technical in scope. The central bank does not plan to issue a retail central bank digital currency or alter monetary policy as part of the experiment. Officials emphasized they will proceed carefully to avoid disrupting existing payment and settlement stability while assessing whether distributed ledger technology can offer operational benefits.