BOJ Expands Blockchain Sandbox to Tokenize Central-Bank Reserves; Retail CBDC Decision Looms
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BOJ Expands Blockchain Sandbox to Tokenize Central-Bank Reserves; Retail CBDC Decision Looms



The Bank of Japan is ramping up its blockchain experiments for settling central bank reserves — and its work on a retail CBDC remains very much alive.

In a speech titled “The New Financial Ecosystem and the Role of Central Banks,” Governor Kazuo Ueda said the BOJ is expanding a sandbox project to test settlement and bank deposits using central-bank money on blockchain infrastructure. The experiments will trial current account deposits tokenized on a blockchain and explore how such systems might connect with Japan’s existing payment and settlement rails.

“We will conduct technical experimentation on settlement using central bank money in the form of current account deposits on a system that uses blockchains,” Ueda said, adding the project will examine domestic interbank settlement, securities settlement and integration methods with legacy systems.

Why it matters to crypto markets
– Blockchain-based settlement of reserves could enable instant, 24/7 settlement and help reduce gridlock during stress events, analysts note — a clear infrastructure upgrade over traditional batch-processing systems.
– Unlike a retail CBDC, which would be a digital form of yen accessible to the general public, the BOJ’s tokenized deposits would be wholesale central bank money used by financial institutions on blockchain rails.

Retail CBDC progress and a looming decision
Ueda reiterated that the BOJ’s retail CBDC work continues. Japan began CBDC experiments in 2021 and launched a pilot in 2023; reports indicate the BOJ is set to decide this year whether to issue a retail CBDC, though no issuance commitment has been made.

International cooperation: Project Agorá
Ueda also highlighted Project Agorá, a collaborative international experiment with other central banks and major private financial institutions. Participants are exploring a mechanism for issuing tokenized central bank money on blockchains — a development that, if successful, could streamline cross-border payments and reduce frictions in global liquidity flows.

Context
The BOJ’s move follows similar steps in the U.K. and Hong Kong, where sovereign debt has been issued on-chain, signaling growing official interest in tokenization and blockchain-based financial plumbing. For crypto observers, the BOJ’s sandbox expansion is another sign that central banks are actively investigating how distributed-ledger technology can reshape wholesale settlement and, possibly, future public forms of digital money.

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