The Bank of Japan is preparing to conduct technical trials using blockchain technology to settle deposits that financial institutions hold at the central bank, according to Governor Kazuo Ueda.

In a speech published Tuesday titled “The New Financial Ecosystem and the Role of Central Banks,” Ueda explained that a sandbox initiative is underway to evaluate settlement using central bank money “in the form of current account deposits on a system that uses blockchains.”

The testing environment will examine how such a system could connect with existing financial infrastructure while exploring practical applications. Among the potential use cases under review are domestic interbank settlements and securities transactions.

The focus of the project is settlement involving central bank current account deposits, which commercial financial institutions maintain at the BOJ. Ueda emphasized that the initiative is being conducted as a technical experiment with input from outside specialists rather than as the rollout of a new monetary policy framework.

Sandbox explores interoperability and new financial architecture

A key objective of the sandbox is to evaluate interoperability with existing infrastructure, including the Bank of Japan Financial Network System, commonly referred to as BOJ-NET. According to Ueda, findings from the experiment could eventually contribute to improvements in that system.

He also noted that combining artificial intelligence with blockchain infrastructure could support more advanced financial services by leveraging transaction and settlement data stored on distributed systems.

At the same time, Ueda highlighted potential risks associated with smart contract design. “When the design of the smart contracts is inadequate, however, there is a risk that the stability of financial markets and payment systems will be threatened,” he said.

Japan advances broader digital asset framework

The experiment is taking place as Japan continues refining its regulatory and technological approach to digital assets. In 2025, the country’s Financial Services Agency initiated public consultations on whether certain tokens should be reclassified under the Financial Instruments and Exchange Act, which could subject some digital assets to disclosure requirements and market conduct rules similar to those applied to securities.

Japan’s government has also incorporated blockchain and tokenization into its broader “New Capitalism 2025” economic strategy, presenting digital infrastructure as a key component of financial modernization.

Developments are also emerging in the private sector. On Oct. 27, 2025, JPYC introduced Japan’s first yen-backed stablecoin under the revised Payment Services Act, which formally recognizes stablecoins as electronic payment instruments. More recently, Sony Bank and stablecoin issuer JPYC signed a memorandum of understanding to explore real-time transfers that would allow customers to purchase yen-backed stablecoins directly from their bank accounts.

Sources:

https://cointelegraph.com/news/boj-blockchain-reserve-settlement-sandbox

https://www.boj.or.jp/en/about/press/koen_2026/ko260303a.htm