Mitsubishi UFJ Financial Group is moving forward with a proof-of-concept project aimed at testing real-time blockchain-based settlement for Japanese government bond repurchase transactions. The initiative seeks to shorten the traditional settlement cycle, which currently takes one to three days, and support continuous 24/7 processing.

Four MUFG companies will collaborate with Digital Asset and Progmat on the effort, which uses the Canton Network. The project focuses on improving operational and capital efficiency for repo trades, in which securities serve as collateral for short-term borrowing and lending.

Project Scope and Technical Approach

The bonds will keep their existing legal status as book-entry transfer securities. Rather than creating new tokenized instruments, the trial will update the relevant account register in tandem with blockchain records. Tokenized deposits or stablecoins are under consideration for the cash leg of transactions.

One component will examine delivery-versus-payment settlement that synchronizes the securities transfer with the cash transfer. This design aims to reduce the risk that one side of a trade completes while the other does not. Digital Asset is supplying the Canton-based tokenization framework, while Progmat is contributing analysis of current market practices and product design.

MUFG Bank and Mitsubishi UFJ Morgan Stanley Securities will participate as market participants. MUFG Bank and Mitsubishi UFJ Trust and Banking will serve as account management institutions, with MUFG Bank also acting as the deposit-taking institution. Outside trading counterparties have not been named.

Automation of the Full Repo Lifecycle

A second element of the trial involves Secured Finance AG. The firm will apply its blockchain lending protocol to automate stages of the repo transaction lifecycle through smart contracts. MUFG expects this approach to support real-time intraday repo activity and extended settlement windows.

The project was selected in February under the Financial Services Agency’s Payment Innovation Project. That program is designed to examine legal, supervisory and compliance questions before new payment and settlement models move into wider use. No regulatory approval for a commercial service was announced alongside the launch of the proof-of-concept.

Broader Context and International Precedents

Financial institutions in Europe and the United States have already advanced similar efforts. Blockchain-based intraday U.S. Treasury bond repo services have operated for several years through JPMorgan’s Kinexys network, which began live operations in 2020. Canton has also reported completion of cross-border intraday repos involving U.S. Treasuries, European government bonds and tokenized commercial bank deposits.

In Japan, related work includes tests by the Japan Securities Clearing Corporation, Mizuho, Nomura and Digital Asset on the use of government bonds as digital collateral. Separately, MUFG is working with Sumitomo Mitsui Financial Group and Mizuho Financial Group on a joint yen stablecoin targeted for live transactions by March 2027. The current JGB project does not specify that this stablecoin will be used for settlement.

MUFG plans to engage regulators along with a wider group of domestic and overseas financial institutions, including its strategic alliance partner Morgan Stanley. The company has not provided a completion date, production launch target or expected transaction volumes for the proof-of-concept. The trial remains experimental and is intended to determine whether legally recognized JGB ownership can be synchronized with blockchain settlement without creating discrepancies between existing book-entry records and onchain systems.