Crypto: Bank Of Japan Testing Blockchain Settlement For Bank Deposits In...

BOJ Governor Kazuo Ueda said the experiments will examine links between blockchain systems and Japan’s existing settlement infrastructure.

The Bank of Japan will conduct technical experiments using blockchain technology to settle deposits held at the central bank by financial institutions, according to BOJ Governor Kazuo Ueda.

In a speech posted Tuesday titled “The New Financial Ecosystem and the Role of Central Banks,” Ueda said a sandbox project is underway to test settlement using central bank money “in the form of current account deposits on a system that uses blockchains.”

The experiments will explore “methods of connection with the existing system” and examine use cases, including “domestic interbank settlement and securities settlement.”

The project centers on settlement using central bank current account deposits, which are held by financial institutions at the BOJ. Ueda said the BOJ plans to proceed with support from external experts, framing the work as a controlled technical test rather than a policy rollout.

The sandbox will study interoperability with current systems, including the Bank of Japan Financial Network System, known as BOJ-NET. Ueda said insights from the project may be used to improve BOJ-NET.

Ueda added that integrating artificial intelligence and blockchain could enable enhanced financial services built on transaction and settlement data recorded on distributed systems.

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Ueda warned of design risks tied to smart contracts. “When the design of the smart contracts is inadequate, however, there is a risk that the stability of financial markets and payment systems will be threatened,” he said.

The sandbox comes as Japan refines its digital asset regulatory framework.

Source: CoinTelegraph