A proof of concept has been launched by four companies within Mitsubishi UFJ Financial Group to assess Japanese government bond repo transactions utilizing the Canton Network, with the objective of achieving automated processing and continuous on-chain settlement.
Summary
- Four MUFG companies are set to investigate Japanese government bond repo transactions on the Canton Network.
- The proof of concept aims to emphasize automated transaction processing and real-time settlement accessible 24/7.
- During the trial, Digital Asset Holdings and Progmat will work alongside MUFG, Mitsubishi UFJ Morgan Stanley Securities, Mitsubishi UFJ Trust and Banking, and MUFG Bank.
- This initiative is part of Japan’s FSA-supported Payment Innovation Project, assessing blockchain-based payment and settlement solutions.
On Thursday, MUFG announced that Mitsubishi UFJ Morgan Stanley Securities, Mitsubishi UFJ Trust and Banking, and MUFG Bank would collaborate with Digital Asset Holdings and Progmat for this trial.
The goal is to determine if blockchain technology can optimize automation throughout the lifecycle of repo transactions, enabling real-time settlement throughout the day. Participants will also assess whether this model can improve funding and capital efficiency.
In repo transactions, one entity sells securities to another with the promise of repurchase at a later date. For this trial, the focus will be on Japanese government bonds examined through a blockchain framework.
MUFG tests JGB repo settlement on Canton Network
The participating companies will leverage the Canton Network to evaluate a model capable of processing Japanese government bond repo transactions on-chain, rather than relying solely on existing market mechanisms.
Canton, developed by Digital Asset, serves as an institutional blockchain network designed specifically for financial applications, including tokenized assets, collateral management, repo transactions, and settlements.
This technology has already been tested with Japanese government bonds. In April, crypto.news reported on a collaboration involving Japan Securities Clearing Corporation, Mizuho Financial Group, Nomura Holdings, and Digital Asset, which utilized Canton to investigate JGBs as digital collateral.
In that proof of concept, participants explored whether blockchain could streamline the transfer of rights and updates to book-entry records while complying with Japan’s existing legal framework. The project also investigated the potential for cross-border use of JGB collateral outside regular operating hours.
Japan Exchange Group revealed that the trial concentrated on JGBs whose rights transfer falls under the country’s Act on Book-Entry Transfer of Corporate Bonds and Shares. The objective was to confirm whether blockchain technology could oversee transfers and book-entry updates among multiple account management institutions.
MUFG’s current initiative specifically targets repo transactions, where government bonds are utilized as collateral for short-term financing arrangements.
In addition to improving settlement speed, the participating companies plan to explore automation throughout the transaction lifecycle. Participants indicated that real-time, day-long settlement could enhance funding efficiency by reducing the time that assets and cash are tied up during processing.
Japan’s FSA is supporting blockchain settlement tests
This proof of concept forms part of the Payment Innovation Project (PIP), a regulatory initiative overseen by Japan’s Financial Services Agency within its FinTech Proof-of-Concept Hub.
The Payment Innovation Project was launched by Japan’s FSA in November 2025 to provide focused support for experiments revolving around payment infrastructure. The regulator has emphasized that the program assists companies in navigating issues related to legal interpretation, compliance, and oversight during new financial technology testing.
In February, the FSA selected a complex securities settlement project for backing under PIP. Financial Services Minister Satsuki Katayama noted that the project would explore rights transfers concerning Japanese government bonds, corporate bonds, investment trusts, and stocks through blockchain records.
This initiative will also include linking securities transfers to payments made using stablecoins, according to the regulator. Japan’s FSA is committed to helping participants address legal and regulatory challenges throughout the demonstration period.
PIP has also examined stablecoin projects with Japan’s leading banks. A joint yen stablecoin initiative involving MUFG Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank aims for live transactions during the fiscal year 2026, ending in March 2027.
The three banks are collaborating on unified guidelines regarding issuance, governance, and systems, intending to facilitate corporate payment scenarios. An earlier proof-of-concept supported by the FSA focused on joint stablecoin issuance and cross-border payments associated with Mitsubishi Corporation’s operations both in Japan and abroad.
Mitsubishi UFJ Trust and Banking oversaw the proposed trust-based issuance framework in that pilot, while Progmat provided the necessary blockchain infrastructure.
As of June, Japan’s FSA reported that PIP projects encompassed initiatives for joint stablecoin issuance among prominent banks, cross-border stablecoin payments, blockchain-based securities transfers settled with stablecoins, and interbank settlements utilizing tokenized deposits.
Progmat is already working on tokenized JGB repo markets
MUFG’s participation aligns this trial with Progmat’s ongoing initiatives in the tokenization of government securities.
In May, Progmat formed a Tokenized JGB / On-chain Repo Working Group under the Digital Asset Co-Creation Consortium to explore how rights linked to Japanese government bonds could be tokenized and utilized as collateral in repo transactions, considering stablecoins for the cash component.
Participants in the group include MUFG Bank, Mizuho Bank, Sumitomo Mitsui Banking Corporation, State Street Trust and Banking, SBI Securities, and the Japan Exchange Group’s Market Innovation & Research division, amongst others.
Zenith, an infrastructure provider associated with the Canton Network, joined the group in June. They are exploring T+0 settlements, 24-hour access, and cross-border prospects for a JGB repo market worth approximately 250 trillion yen to 270 trillion yen.
A report detailing the working group’s outcomes is expected in October 2026, with plans for tokenized JGB issuance pilot projects later that same year.
Canton has also found applications beyond Japan for tokenized government securities. Earlier this year, S&P Dow Jones Indices and Kaiko moved a Treasury index onto Canton, representing the iBoxx U.S. Treasuries index through smart-contract technology along with other tokenized Treasury initiatives on the network.
Digital Asset has continued to gain institutional support while expanding the capabilities of Canton. In June, the firm secured $355 million in funding led by Andreessen Horowitz, focusing on tokenized issuance, settlement, and collateral infrastructure.
MUFG has built its blockchain plans around Progmat
MUFG’s collaboration with Progmat has been ongoing for several years. In June 2023, the Japanese financial conglomerate was engaged in discussions about stablecoin issuance with other firms through its Progmat platform, aimed at supporting digital assets within Japan’s regulated stablecoin framework.
At that point, MUFG intended to enable banks and qualified entities to issue stablecoins in compliance with Japan’s regulations that restrict issuance to licensed banks, registered money transfer businesses, and trust companies.
The stablecoin initiative followed MUFG’s decision in February 2022 to wind down GO-Net Japan, a blockchain payment project developed in partnership with Akamai Technologies, resulting in a more focused effort on digital assets surrounding Progmat and regulated token issuance.
By September 2024, MUFG Bank, Mizuho, and SMBC were preparing for a cross-border stablecoin transfer trial under Project Pax, collaborating with Progmat and Datachain to use Swift’s API as part of the transfer architecture.
Japan’s institutional stablecoin market is advancing toward commercial utilization. MUFG, SMBC, and Mizuho have set their sights on launching joint yen-denominated stablecoin transactions during the fiscal year 2026, leveraging Progmat for the essential infrastructure.
