BOJ to experiment with blockchain settlement for reserves

The Bank of Japan (BOJ) announced it will conduct experiments using blockchain technology to settle deposits that financial institutions hold with the central bank. Governor Kazuo Ueda stated these experiments are part of a “sandbox project” to explore using central bank money for various settlements via blockchain. The BOJ intends to explore connections with existing systems and use cases like domestic interbank and securities settlement. Analysts believe blockchain settlement could enable instant, 24/7 settlement and reduce risks during times of financial stress.

Ueda highlighted the potential of combining blockchain with artificial intelligence (AI) to further enhance financial services, noting AI’s ability to quickly analyze and process large datasets. He emphasized that central bank money remains the “anchor of trust” for the economy, connecting all payment instruments and serving as the safest settlement asset.

The BOJ has been exploring central bank digital currencies (CBDCs) since 2021, including a pilot program for retail CBDC distributed through private banks. However, no decision has been made regarding CBDC issuance, with some analysts questioning its necessity in Japan given the prevalence of private digital payments and cash usage. The BOJ is also participating in international efforts to build a blockchain-based mechanism for cross-border payments using tokenized central bank money.

(Source：Channel Newsasia)