Bank of Japan tests blockchain settlement system: Reserves on the chain, financial infrastructure may undergo a key upgrade

On March 3, according to The Block, the Bank of Japan is exploring the integration of blockchain technology into the central bank settlement system. Bank of Japan Governor Kazuo Ueda stated at the FIN/SUM fintech conference in Tokyo that the BOJ has launched experimental projects to test how central bank reserves operate on blockchain systems. This could provide new technological pathways for interbank fund clearing and securities settlement.

Ueda pointed out that the global financial system is entering a new technological phase, with tokenized assets, programmable currencies, and blockchain settlement technologies gradually transforming traditional payment systems and capital markets. Although the Bank of Japan remains cautious, it has begun technical testing of financial institutions’ current account deposits held at the central bank and has established a dedicated sandbox environment to evaluate the feasibility of blockchain settlement networks.

According to the BOJ’s research focus, this project will mainly explore whether central bank funds can be securely transferred within a blockchain network, and how to connect with existing interbank clearing systems. If blockchain technology is combined with smart contracts, the efficiency of interbank transfers and securities settlements could be significantly improved in the future.

This exploration also aligns with technological innovations in the international financial system. The BOJ is participating in the BIS-led Agora project, which brings together multiple central banks to study cross-border wholesale settlement using tokenized central bank digital currencies (CBDCs). Participating institutions are evaluating a framework that allows central banks to issue tokenized deposits on blockchain and achieve automated clearing through smart contracts.

If these technological solutions are implemented, cross-border payment processes could be greatly simplified, and the time and costs associated with traditional international clearing could decrease.

Meanwhile, the BOJ continues to advance its retail CBDC pilot project. The central bank is currently testing the core infrastructure of the CBDC system and collaborating with private sector entities through the CBDC forum to gather technical expertise and operational advice. In the next phase, the forum’s discussions will expand to broader topics related to the development of the payment ecosystem.

On the regulatory front, Japan’s digital asset policies are also being continuously refined. By 2025, Japanese financial regulators have reclassified over 100 cryptocurrencies, including Bitcoin and Ethereum, as financial products, further integrating them into the existing financial regulatory framework. These policy changes demonstrate Japan’s gradual efforts to promote the integration of blockchain technology with traditional financial systems.