Bank of Japan tests blockchain for settlements, explores CBDC, and advances digital infrastructure to strengthen payment stability and innovation.
The Bank of Japan is testing blockchain for central bank settlements. The move is a sign of deeper integration of blockchain in Japan’s financial infrastructure. Governor Kazuo Ueda gave the update at the Fin/Sum 2026 conference in Tokyo. He said that central banks had to adapt to a new financial ecosystem in the context of AI and blockchain.
BOJ Signals Shift Toward Blockchain-Based Financial Infrastructure
The Bank of Japan set up its FinTech Center in 2016. Since then, it has researched blockchain and AI applications in finance. Moreover, the Bank collaborated with the European Central Bank on research. That research reviewed the benefits and risks of distributed ledger technology in settlements.
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Over the last 10 years, blockchain has been brought to practical usage in the world of finance. For instance, decentralized finance employs smart contracts in bundled transactions. These contracts can be used to combine the process of borrowing and repayment into a single automated process. As a result, the speed of settlement is faster and more efficient across platforms.
Furthermore, blockchain can possibly support delivery versus payment settlements. This method ensures that assets are only moved if payments are completed. Therefore, the risks in securities markets could go down. Early use cases include crypto arbitrage and collateral exchanges.
At the same time, AI tools now process large amounts of data in a fast manner. AI can enhance fraud detection and anti-money laundering controls. In addition to this, AI may be used to assist in automated collateral valuation. Consequently, combining AI and blockchain has the potential to transform the payments and securities markets.
However, there is a challenge associated with interoperability. Many blockchain systems may not be able to connect seamlessly. Therefore, the conversion of payment instruments between the platforms may introduce friction. Ueda cautioned that stability should be the priority.
Central Bank Money Remains Anchor of Trust in Digital Era
Ueda emphasised that central bank money guarantees payment stability. Cash and current account deposits have the safest of settlement assets. Further, central bank money guarantees that the deposits trade at equal value. Without this anchor, payment systems may become unstable.
The Bank is conducting a retail CBDC pilot program. This project is a test of a digital version of central bank cash. In addition, the Bank is in charge of a CBDC Forum with private firms. The aim is to investigate innovation in payments, while ensuring stability.
Another major effort is Project AgorA. This is an international initiative in which tokenized central bank deposits on blockchain are studied. Smart contracts could be used to facilitate atomic cross-border payments. If successful, cross-border settlements could become faster and more secure.
The Bank has also been operating a sandbox project. It will be testing current accounts deposits on blockchain systems. These deposits are reserves in the financial institution. The experiment will study domestic interbank and securities settlements.
Insights from these projects may lead to the upgrade of BOJ-NET. BOJ-NET manages the large-value payment infrastructure in Japan. Meanwhile, the Bank recently issued redesigned banknotes with better security features. These are actions of commitment to innovation and trust.
In conclusion, the Bank of Japan is carefully moving forward with the adoption of blockchain. It is an effort to unite innovation and financial stability. Through pilots, research, and cooperation around the world, the Bank aims to create a secure digital ecosystem.
