Four MUFG Group entities - MUFG, Mitsubishi UFJ Morgan Stanley Securities, Mitsubishi UFJ Trust and Banking, and MUFG Bank - have stepped in to test the settlement of Japanese government bond (JGB) repo transactions directly on the Canton Network. In collaboration with Digital Asset Holdings and Progmat, they are building a proof-of-concept (PoC) system targeting real-time intraday transaction settlement. The new system is projected to operate 24 hours a day to create operational and capital efficiency for financial institutions.
This initiative is running under regulatory supervision. The project was selected as part of the Payment Innovation Project pilot run by the Japan Financial Services Agency (FSA) regulator, a program announced in February 2026. The most fundamental aspect of this design is the status of the assets. Even though the process moves to the blockchain, JGBs retain their full legal status as book-entry transfer bonds. The conventional account register that binds these bonds will continue to be updated in tandem with the transaction records on the Canton Network.
How the Trial Works
To execute the payment side, MUFG and its partners are considering the use of stablecoins or tokenized deposits as cash instruments. The proof-of-concept testing is split into two major parts. The first part tests the delivery-versus-payment (DVP) mechanism between government bonds and digital money, a process designed to synchronize asset movement on the securities leg with payment on the cash leg simultaneously.
The second part is delegated to Secured Finance AG to test the automation of the entire repo transaction lifecycle through smart contract execution. At this stage, the participants have not yet announced a definitive date for a commercial launch, given that all processes are still in the testing phase and have not received final regulatory approval.
Following in the Footsteps of Western Markets
This move by Japan is an effort to catch up with the dynamics of Western markets. In Europe and the United States, intraday repo projects for instruments such as JGBs and US Treasuries have progressed further. The Canton Network itself has a relevant track record after completing cross-border intraday repo transactions last January.
This is not the first time major Japanese banking institutions have worked on similar infrastructure. MUFG, alongside SMBC and Mizuho, had previously drafted plans to launch direct transactions using a shared yen stablecoin, scheduled for March 2027. Now, MUFG is preparing to take this JGB experiment further by involving regulators as well as domestic and international financial institutions, including the Morgan Stanley network. Their readiness to engage multiple parties will determine how quickly conventional systems are willing to migrate to distributed ledgers.
Reported by Cointelegraph.
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