MUFG Plans Blockchain Test for Japanese Government Bond Settlement on Canton Network

Japan’s Mitsubishi UFJ Financial Group is testing blockchain-based settlement for government bond repo transactions, targeting faster transfers in a market with outstanding balances of about ¥270 trillion.

MUFG Tests Real-Time JGB Repo Settlement

MUFG has started a proof of concept focused on settling Japanese government bond repo transactions through blockchain infrastructure. The project aims to replace the current T+1 process with a system that can settle the payment and securities sides of a transaction at the same time.

Japan’s JGB repo market had outstanding balances of about ¥270 trillion in 2025. Under the existing process, financial institutions may need to maintain additional funds while waiting for transactions to settle. MUFG is testing whether faster settlement can reduce that requirement.

The trial involves MUFG Bank, Mitsubishi UFJ Morgan Stanley Securities and Mitsubishi UFJ Trust and Banking. Repo transaction information from Mitsubishi UFJ Morgan Stanley Securities will provide settlement instructions for the blockchain-based system.

Canton Network and Progmat Support Blockchain Trial

The proof-of-concept combines infrastructure from Progmat with technology from Digital Asset, the developer behind Canton Network. Canton provides blockchain infrastructure designed for financial institutions that need transaction privacy while connecting different participants and financial applications.

MUFG plans to test atomic delivery versus payment, or DvP, through the system. Under this structure, payment and the corresponding securities transfer are completed together, rather than leaving a period between the two settlement steps.

The Japanese government bonds themselves will remain within the country’s existing book-entry system rather than being issued as blockchain tokens. The blockchain layer will instead synchronize settlement records, avoiding the legal and operational questions involved in directly tokenizing JGBs.

Tokenized Deposits and Stablecoins Considered for Payments

MUFG is considering tokenized bank deposits and stablecoins as payment instruments for the settlement process. Tokenized deposits represent traditional bank deposits on blockchain infrastructure, allowing value to move digitally while remaining denominated in fiat currency.

Japan’s major banks have also been developing stablecoin infrastructure that could support blockchain-based financial transactions. The JGB repo project provides another potential use for those payment instruments within institutional markets.

MUFG expects to complete the proof-of-concept by the end of 2026. Commercial deployment could begin as early as fiscal 2027, with the broader rollout targeted between fiscal 2027 and fiscal 2029.

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