MUFG, Mizuho test JGB repos on Canton Network for 24-hour settlement

Four MUFG companies launched a proof of concept Aug. 13 to settle Japanese government bond repo trades on the Canton Network, targeting 24-hour settlement in a market with roughly 270 trillion yen outstanding.

The trial, announced in an official MUFG press release, brings together Mitsubishi UFJ Morgan Stanley Securities, Mitsubishi UFJ Trust and Banking and MUFG Bank with Digital Asset Holdings and Progmat. It forms part of the Payment Innovation Project, a regulatory program Japan's Financial Services Agency runs under its FinTech Proof-of-Concept Hub to help companies resolve legal and compliance questions while testing new payment infrastructure.

The proof of concept runs two tracks. The first tests on-chain delivery-versus-payment settlement of JGBs using digital money, where the payment and securities legs complete together rather than leaving a gap between steps. The second aims to automate the full repo lifecycle using a lending protocol developed by Switzerland-based Secured Finance, which joined Progmat's JGB repo working group in May. The JGBs themselves stay within Japan's existing book-entry system; the blockchain layer synchronizes settlement records with the conventional registers, preserving compliance with the Act on Book-Entry Transfer of Corporate Bonds and Shares.

The JGB repo market had outstanding balances of about 270 trillion yen in 2025, and the current T+1 process can leave capital tied up while institutions wait for settlement. Faster intraday settlement operating around the clock could reduce that funding requirement and lower counterparty risk. MUFG expects to complete the proof of concept by the end of 2026, with commercial deployment possible as early as fiscal 2027 and a broader rollout targeted between fiscal 2027 and fiscal 2029.

MUFG is considering tokenized bank deposits and stablecoins as payment instruments for the settlement process. Japan's three megabanks — MUFG Bank, Sumitomo Mitsui Banking Corporation and Mizuho Bank — have been building a joint yen stablecoin under the same FSA program, targeting live transactions during fiscal 2026, which ends in March 2027. Mitsubishi UFJ Trust and Banking handled the trust-based issuance structure in an earlier pilot, with Progmat supplying the blockchain infrastructure.

Progmat's Tokenized JGB / On-chain Repo Working Group, which includes MUFG Bank, Mizuho Bank, Sumitomo Mitsui Banking Corporation, State Street Trust and Banking, SBI Securities and Japan Exchange Group, is studying T+0 settlement and cross-border access for the market, with a report due in October 2026. The trial follows an April test in which Japan Securities Clearing Corporation, Mizuho Financial Group, Nomura Holdings and Digital Asset used Canton to examine JGBs as digital collateral. Digital Asset, which developed Canton as an institutional blockchain network for tokenized assets, collateral management and repo, raised $355 million in June in a round led by Andreessen Horowitz.

The push reflects a broader shift of government securities onto blockchain infrastructure. S&P Dow Jones Indices and Kaiko moved the iBoxx U.S. Treasuries index onto Canton earlier this year, and the European Central Bank and Bank for International Settlements have run wholesale DLT settlement trials. If MUFG's pilot succeeds, it could set a precedent for other asset classes and encourage wider use of DLT in core market infrastructure, giving tokenized deposits and stablecoins a foothold in institutional fixed-income settlement.

This article is for informational purposes only and does not constitute investment advice.