Bank of Japan Tests Blockchain in Core Financial Settlement Systems

TL;DR:

• BOJ Governor Kazuo Ueda said at Fin/Sum 2026 that the bank is testing blockchain for central bank settlements as AI and blockchain reshape finance.
• BOJ highlights delivery-versus-payment potential, plus AI for fraud detection, AML and collateral valuation, while warning interoperability gaps can add friction.
• Retail CBDC pilot, CBDC Forum, Project AgorA and a sandbox for deposits could inform BOJ-NET upgrades, keeping central bank money as anchor.

The Bank of Japan is testing blockchain for central bank settlements, and Governor Kazuo Ueda said the work reflects BOJ stress-testing blockchain inside core settlement plumbing as AI and blockchain reshape finance. Speaking at the Fin/Sum 2026 conference in Tokyo, Ueda framed the effort as adaptation to a new financial ecosystem, not a side experiment. The testing signals deeper integration of distributed systems into Japan’s payment infrastructure while the bank keeps public communication cautious. For stakeholders, the message is practical: modernization is underway, but stability remains the headline constraint under controlled, phased conditions.

The BOJ established its FinTech Center in 2016 and has researched blockchain and AI applications, including joint work with the European Central Bank on the benefits and risks of distributed ledger technology in settlements. The report points to DeFi smart contracts bundling borrowing and repayment into one automated flow and argues that DLT can speed settlement and reduce securities-market risk via delivery-versus-payment. If assets move only when payment completes, counterparty risk can fall. Early use cases cited include crypto arbitrage and collateral exchanges that rely on faster coordination across back-office rails.

AI is the second pillar. The report says AI tools can process large datasets quickly, supporting fraud detection and anti-money laundering controls, and may help automate collateral valuation. Put together, AI plus blockchain could transform payments and securities workflows by pairing automated decisioning with programmable settlement. Yet Ueda also flagged a hard operational challenge: interoperability. If blockchain systems cannot connect seamlessly, converting payment instruments across platforms can add friction and complicate scale. In the BOJ’s framing, innovation is welcome, but stability must stay the priority. The goal is automation with auditability, without breaking connectivity.

Ueda emphasized that central bank money underpins payment stability, calling cash and current account deposits the safest settlement assets and noting that central bank money helps deposits trade at equal value. Alongside that anchor, the BOJ is running a retail CBDC pilot and a CBDC Forum with private firms, while Project AgorA studies tokenized central bank deposits and smart contracts for atomic cross-border payments. With a sandbox testing deposits on blockchain for domestic interbank settlement, the upgrade path toward BOJ-NET becomes more concrete. The bank issued redesigned banknotes with better security features recently.