Japan's Ministry of Finance proposed a three-type scheme for tokenization of government bonds
The Ministry of Finance of Japan held the first meeting of the “Government Bond On-Chain Study Group” today, and released explanatory materials, organizing government bond on-chain approaches into three types. Type 1 is circulating the beneficiary rights of funds (MMFs) that invest in government bonds on a blockchain; Type 2 is putting transfer ledgers on-chain under the current transfer and settlement system, with three forms of single account management institution, multi-institution collaboration, and interfacing with the Bank of Japan’s ledger; Type 3 is issuing a new form of government bond on a blockchain outside the current system.
The Ministry of Finance believes that on-chaining can improve the efficiency of collateral and liquidity management and expand the investor base, especially benefiting overseas investors, but it also pointed out issues such as market fragmentation, transmission of severe price volatility, and system renovation costs. The three types are all tentative classifications, and the Ministry of Finance plans to compile a report by January 2027.
The Ministry of Finance of Japan held the first meeting of the “Government Bond On-Chain Study Group” today, and released explanatory materials, organizing government bond on-chain approaches into three types. Type 1 is circulating the beneficiary rights of funds (MMFs) that invest in government bonds on a blockchain; Type 2 is putting transfer ledgers on-chain under the current transfer and settlement system, with three forms of single account management institution, multi-institution collaboration, and interfacing with the Bank of Japan’s ledger; Type 3 is issuing a new form of government bond on a blockchain outside the current system.
The Ministry of Finance believes that on-chaining can improve the efficiency of collateral and liquidity management and expand the investor base, especially benefiting overseas investors, but it also pointed out issues such as market fragmentation, transmission of severe price volatility, and system renovation costs. The three types are all tentative classifications, and the Ministry of Finance plans to compile a report by January 2027.