The government expects this system to be in operation later this year, aiming to lower costs and speed up transactions involving government bonds. Digital asset developer Progmat will serve as the secretariat for the organization undertaking this tokenization endeavor.
Key Takeaways:
Led by Progmat, Japan will tokenize government bonds this year to tap the $4T daily global repo market.Tokenization will cut 1-day settlements to instant, boosting market liquidity for securities.Next, Japan hopes to expand its $2.3B digital security market to attract trillions of yen in capital.To achieve the tokenization of Japanese bonds, a new entity will be created with Progmat, a Japanese digital assets developer, at the helm, and participation of the largest Japanese banking groups and institutions like Tokio Marine Holdings, Daiwa Securities, and SBI Securities.
One of the most ambitious goals of the project is to shorten settlement times of these bonds, which are now traded and settled on the next business day. With the proposed tokenization, trading and settlement of these bonds will happen almost instantly, enhancing the capital efficiency of these operations.
The Japanese digital security market is still in its nascent stages, with only $2.3 billion issued, most representing real estate assets. Nonetheless, with this move, the market is ready to boom, as institutions will enter and bring trillions of yen in capital to support bond operations.
Japan’s push towards bond tokenization comes after other markets, including the U.S., are also undergoing similar changes. In December, the Depository Trust & Clearing Corporation (DTCC) unveiled an initiative to move U.S. treasuries on-chain.
