MUFG to Launch Japanese Government Bond Repos on Canton Network

A proof of concept has been launched by four firms within Mitsubishi UFJ Financial Group to assess Japanese government bond repo transactions via the Canton Network, with the goal of enabling automated processing and continuous on-chain settlement.

On Thursday, it was announced by MUFG that Mitsubishi UFJ Morgan Stanley Securities, Mitsubishi UFJ Trust and Banking, and MUFG Bank will team up with Digital Asset Holdings and Progmat for this trial.

The objective is to assess whether blockchain technology can streamline the automation of repo transaction lifecycles, enabling real-time settlement throughout the day. Participants will also explore if this model can enhance funding and capital efficiency.

Repo transactions involve one party selling securities to another with the intent to repurchase them later. For this trial, Japanese government bonds will be the instruments examined through blockchain technology.

MUFG tests JGB repo settlement on Canton Network

The involved parties will leverage the Canton Network to validate a model that can process Japanese government bond repo transactions on-chain, rather than relying solely on traditional market frameworks.

Canton, created by Digital Asset, is an institutional blockchain network designed for financial applications, including tokenization of assets, collateral management, repo transactions, and settlements.

This technology has been previously 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.

During that proof of concept, participants examined whether blockchain could facilitate the transfer of rights and updates to book-entry records while complying with Japan’s current legal framework. The project also looked into the potential for cross-border use of JGB collateral beyond normal operating hours.

Japan Exchange Group indicated that the trial was centered on JGBs, with rights transfers governed by the country’s Act on Book-Entry Transfer of Corporate Bonds and Shares. The goal was to determine whether blockchain could effectively manage transfers and book-entry updates among various account-management entities.

MUFG’s latest initiative narrows the scope specifically to repo transactions, where government bonds act as collateral for short-term financing arrangements.

In addition to accelerating settlement speeds, the companies intend to explore automation throughout the transaction lifecycle. Participants believe that a real-time, intraday settlement operating continuously could improve funding efficiency by reducing the time that assets and cash are locked during processing.

Japan’s FSA is supporting blockchain settlement tests

This proof of concept is part of the Payment Innovation Project, a regulatory initiative led by Japan’s Financial Services Agency within its FinTech Proof-of-Concept Hub.

The Payment Innovation Project was inaugurated by Japan’s FSA in November 2025 to provide specialized support for experiments related to payment infrastructure. The regulator has stressed that the program assists companies in navigating legal interpretation, compliance, and oversight during the testing of new financial technologies.

In February, the FSA selected a complex securities settlement project for backing under PIP. Financial Services Minister Satsuki Katayama noted that the project would investigate rights transfers concerning Japanese government bonds, corporate bonds, investment trusts, and stocks through blockchain records.

This initiative also includes linking securities transfers to payments executed via stablecoins, as per the regulator. Japan’s FSA has pledged to help participants address legal and regulatory challenges throughout the demonstration phase.

PIP has also evaluated stablecoin projects alongside Japan’s top banks. A collaborative yen stablecoin initiative involving MUFG Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank aims for live transactions during fiscal year 2026, which ends in March 2027.

These three banks are developing unified guidelines regarding issuance, governance, and systems to facilitate corporate payment applications. An earlier proof of concept supported by the FSA concentrated on joint stablecoin issuance and cross-border payments related to Mitsubishi Corporation’s activities both domestically and internationally.

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 involved initiatives for joint stablecoin issuance by major banks, cross-border stablecoin payments, blockchain-based securities transfers settled with stablecoins, and interbank settlements using tokenized deposits.

Progmat is already working on tokenized JGB repo markets

MUFG’s participation aligns this trial with Progmat’s ongoing efforts to tokenize government securities.

In May, Progmat created a Tokenized JGB / On-chain Repo Working Group under the Digital Asset Co-Creation Consortium to explore how rights associated with Japanese government bonds could be tokenized and utilized as collateral in repo transactions, considering stablecoins for the cash aspect.

Participants in the group include MUFG Bank, Mizuho Bank, Sumitomo Mitsui Banking Corporation, State Street Trust and Banking, SBI Securities, and the Market Innovation & Research division of Japan Exchange Group, among others.

Zenith, an infrastructure provider connected to the Canton Network, joined the group in June. They are investigating T+0 settlements, 24/7 access, and cross-border opportunities for a JGB repo market valued between approximately 250 trillion yen and 270 trillion yen.

A report detailing the findings of the working group is expected in October 2026, with plans for tokenized JGB issuance pilot projects slated for later that year.

Canton has also seen applications beyond Japan for tokenized government securities. Earlier this year, S&P Dow Jones Indices and Kaiko transitioned a Treasury index onto Canton, representing the iBoxx U.S. Treasuries index via smart contract technology along with other tokenized Treasury activities on the network.

Digital Asset has continued to secure institutional endorsement while broadening the functionalities of Canton. In June, the company raised $355 million in a funding round 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 in motion for several years. In June 2023, the Japanese financial group engaged in discussions regarding stablecoin issuance with companies through its Progmat platform, designed to support digital assets within Japan’s regulated stablecoin framework.

At that time, MUFG’s plans involved enabling banks and qualified entities to issue stablecoins in accordance 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 discontinue GO-Net Japan, a blockchain payment project developed in partnership with Akamai Technologies, resulting in a more focused approach on digital assets centered around 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, joining forces with Progmat and Datachain to incorporate Swift’s API as part of the transfer framework.

Japan’s institutional stablecoin market has progressed toward commercial implementation. MUFG, SMBC, and Mizuho are aiming to launch joint yen-denominated stablecoin transactions during fiscal 2026, leveraging Progmat for the essential infrastructure.