MUFG to test real-time blockchain settlement for Japanese government bond trades

Mitsubishi UFJ Financial Group (MUFG) plans to use blockchain technology to offer faster settlement of Japanese government bond (JGB) transactions, in a move reminiscent of similar initiatives by banks in other countries.

MUFG is preparing a proof-of-concept for onchain JGB transactions using the Canton network to expedite the settlement, which typically takes 1-3 days by traditional means.

The Tokyo-based bank expects to improve the operational and capital efficiency of repo transactions — the purchase of securities as a form of short-term borrowing and lending — through real-time 24/7 onchain settlement.

MUFG noted that financial institutions in Europe and the U.S. have expanded proof-of-concept projects to achieve this exact goal. Blockchain-based intraday U.S. Treasury-bond repos have existed for several years through JPMorgan’s Kinexys network, which went live in 2020.

“Given their high credit worthiness and liquidity, JGBs are widely used as collateral for repo transactions by market participants in Japan and overseas, and momentum for bringing them onchain is growing,” MUFG said on Wednesday.

The project forms part of a broader array of MUFG initiatives exploring the use of blockchain technology in traditional financial functions. Most recently, the bank teamed up with two of the largest Japanese banks, Sumitomo ⁠Mitsui Financial Group (SMBC) and Mizuho Financial Group, to explore listing a jointly issued stablecoin by March 2027.