MUFG is piloting real-time JGB repo settlement on a blockchain network, using smart contracts and digital money to automate operations and reduce capital held against settlement delays.
MUFG has launched a pilot to test whether Japanese government bond repo trades can settle in real time on a blockchain network. The major Japanese banking group, which carries an Alpha Score of 57 out of 100 (Moderate) on AlphaScala's proprietary risk model, is working with Digital Asset and Progmat on the proof of concept. MUFG Bank and Mitsubishi UFJ Morgan Stanley Securities are also participating.
A repo is a short-term financing deal where one party sells securities and agrees to buy them back later. Japanese government bonds, or JGBs, are widely used as collateral because they are highly liquid and backed by the state.
In conventional markets, completing a trade can take time and require several separate systems to update records. That can leave firms holding extra cash and collateral while they wait for settlement.
MUFG’s pilot will not replace JGBs with blockchain tokens. The bonds remain book-entry transfer securities under Japan’s existing system. The blockchain synchronizes changes to the account registers maintained by the institutions that manage the bonds. Payment and delivery occur together, a process known as delivery versus payment, using digital money such as tokenized bank deposits or stablecoins.
Canton, the blockchain network created by Digital Asset, was designed for institutional finance. It allows transaction details to be shared only with the parties that need to see them. Secured Finance AG will provide a lending protocol intended to handle the full repo process through smart contracts.
Faster settlement could make funding and collateral more efficient for banks and securities firms. It could also support intraday repo trades, where positions open and close on the same trading day.
MUFG said the pilot aims to automate operational work and expand the settlement window. A near-real-time system could eventually reduce the amount of capital firms set aside to manage settlement delays.
The effort is part of Japan’s Financial Services Agency Payment Innovation Project, which selected the related pilots in February 2026. MUFG plans to work with regulators and other institutions as the project develops.
MUFG has previously pursued security tokens and digital-money projects, including a plan with other major banks for stablecoin transactions in fiscal 2026.
The pilot does not guarantee a commercial service. Legal coordination and links to existing market systems will shape whether the approach moves beyond the pilot stage, MUFG said.
Morgan Stanley, which partners in the joint venture, carries an Alpha Score of 56 out of 100 (Moderate) on AlphaScala's scale. MS shares were little changed in Wednesday trading.
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