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【Japan’s Ministry of Finance proposes a “three-type” plan for tokenizing government bonds】

Japan’s Ministry of Finance held the first meeting of the “Study Group on Putting Government Bonds on Blockchain” today and released explanatory materials, dividing the process of putting government bonds on blockchain into three types. Type 1 involves the beneficial interests of funds investing in government bonds (MMF) circulating on the blockchain; Type 2 involves putting transfer ledgers on the blockchain under the current transfer and settlement system, with three forms: management by a single account management institution, coordination among multiple institutions, and connection to the Bank of Japan’s ledger; Type 3 involves issuing a new form of government bond on a blockchain outside the current system. The Ministry of Finance believes that putting government bonds on blockchain could improve the efficiency of collateral and liquidity management and expand the investor base, particularly benefiting overseas investors, but it also identified challenges including market fragmentation, the transmission of sharp price volatility, and system modification costs. All three types are provisional classifications, and the Ministry of Finance plans to compile a report by 2027 January.