Bank of Japan Tests Blockchain Settlement for Bank Deposits in New Sandbox

The Bank of Japan (BOJ) is conducting technical experiments using blockchain technology to settle deposits held by financial institutions at the central bank.

BOJ Governor Kazuo Ueda revealed the initiative in a speech titled “The New Financial Ecosystem and the Role of Central Banks.” The sandbox project will test settlement using central bank money “in the form of current account deposits on a system that uses blockchains.”

Importantly, Ueda emphasized that the initiative is a controlled technical experiment, not a policy rollout.

Focus on Interbank and Securities Settlement

The blockchain sandbox will explore:

• Domestic interbank settlement

• Securities settlement

• Connection methods with existing infrastructure

• Design of distributed settlement systems

A key area of research is interoperability with the Bank of Japan Financial Network System (BOJ-NET) — Japan’s primary payment and settlement network.

According to Ueda, insights from the sandbox may ultimately contribute to improvements in BOJ-NET’s architecture.

AI and Blockchain Integration

The BOJ is also evaluating how artificial intelligence could complement blockchain-based infrastructure.

Ueda suggested that combining AI with distributed ledger systems may enable:

• Enhanced transaction analytics

• Smarter settlement automation

• Data-driven financial services

However, he cautioned that poorly designed smart contracts could introduce systemic risks.

“When the design of the smart contracts is inadequate, there is a risk that the stability of financial markets and payment systems will be threatened,” Ueda stated.

Japan’s Broader Digital Asset Push

Japan has been actively modernizing its digital asset framework.

In 2025, the Financial Services Agency conducted consultations on reclassifying certain tokens under the Financial Instruments and Exchange Act. The move could subject select digital assets to securities-style disclosure and compliance standards.

The government has also included blockchain and tokenization initiatives under its “New Capitalism 2025” growth strategy, positioning digital infrastructure as a pillar of financial modernization.

Stablecoin Integration Expands

Private-sector adoption is also accelerating.

On Oct. 27, 2025, JPYC launched Japan’s first yen-backed stablecoin under the revised Payment Services Act, which formally recognizes stablecoins as electronic payment instruments.

More recently, Sony Bank signed a memorandum of understanding with JPYC to study real-time transfers, enabling customers to purchase yen-backed stablecoins directly from bank accounts.

What This Means for Global Finance

The BOJ’s blockchain sandbox signals that major central banks continue exploring distributed ledger technology — not necessarily to replace existing systems, but to enhance settlement efficiency and resilience.

While still experimental, Japan’s approach reflects a broader global trend: blending traditional financial infrastructure with blockchain innovation under strict regulatory oversight.

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