MUFG pilots blockchain settlement for JGB repo trades

Mitsubishi UFJ Financial Group is running a proof-of-concept to settle repurchase agreement trades secured by Japanese Government Bonds on the Canton Network blockchain. The pilot is designed to automate the repo lifecycle and allow settlement to occur 24 hours a day, seven days a week.

The Canton Network is a distributed ledger platform that records asset transfers and contractual events between multiple parties. MUFG expects on-chain settlement to speed processing by automating lifecycle steps, reduce manual intervention and make intraday funding and capital use more efficient.

The bank noted the project follows similar activity in Europe and the United States, where intraday government bond repo transactions have expanded and commercial services for intraday U.S. Treasury repo are operating.

Repos are short-term secured loans in which one party sells securities and agrees to repurchase them later. Japanese Government Bonds are widely used as collateral in Japan because of their liquidity and credit standing. MUFG noted in a statement: “Given their high creditworthiness and liquidity, JGBs are widely used as collateral for repo transactions by market participants in Japan and overseas, and momentum and expectations for bringing them on-chain are growing.”

MUFG did not disclose a timetable for moving beyond the proof-of-concept or which counterparties are taking part. The bank described the work as an experimentation phase to test operational and technical aspects of on-chain repo settlement before any wider rollout.

MUFG said on-chain settlement could reduce counterparty and settlement risk and shorten the time collateral is tied up, which would change how firms manage intraday liquidity and regulatory capital.