Key Takeaways:
- Avalanche and Progmat are initiating a long-term campaign to shift the Japanese government bond repo business onto-chain.
- Stablecoin settlement, DeFi-powered repo transactions and tokenized Japanese Government Bonds (TJGBs) are included in the project.
- There are more than $2 billion in tokenized securities already on a Progmat platform, powered by its infrastructure on the Avalanche chain.
The country’s huge government bond market is the latest to gain traction in blockchain’s finance revolution. Avalanche and Progmat are currently aggressively advocating for the modernization of repo transactions via tokenized bonds, stablecoins and a recently built onchain settlement technology geared towards institutions.
Commercial deployment is slated for 2026, and the initiative may well be one of the biggest real world asset tokenization in Asia if it goes into effect.
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Avalanche and Progmat Launch Tokenized JGB Initiative
Progmat announced the creation of the “Tokenized JGB/On-Chain Repo Working Group” under the Digital Asset Co-Creation Consortium, which includes more than 330 member organizations.
The group will research the tokenization and use of JGBs as collateral in blockchain-based Repo transactions settled with Stablecoins and also consider its future development.
Avalanche emphasized that there’s a massive opportunity in the market, as approximately $1.6 trillion worth of government bonds are traded in a repo market within Japan.
Progmat, which runs one of Japan’s biggest tokenized securities trading platforms, said the protocol will be designed to “enable 24/7 transactions by using the T+0 settlement scheme instead of the traditional T+1 settlement scheme in conventional repo markets.
Another feature of the infrastructure would enable more institutional investors to participate, who want easy access to liquidity and a better experience of dealing with their collateral, the company said.
Stablecoins and DeFi Infrastructure Move Into Traditional Finance
Japan Eyes Faster Institutional Settlement Systems
The working group will discuss legal, accounting, tax, technical and operational concerns in relation to tokenization of government bonds and on-chain repo activity.
The proposed structure would involve tokenizing JGBs as collateral, while the stablecoins would play the role of the cash leg of the transaction, according to Progmat. A settlement and a position management would be onchain, whereas the lending protocol and the infrastructure of decentralized finance would be doing it instead.
Progmat noted some recent developments happening in the United States, including tokenisation of traditional clearing houses and repoing of U.S. Treasuries and USDC.
By the end of 2024, its “markets for repurchasing government bonds” had grown to around $16 trillion at world level, comprising almost 10% of transactions in Japan, it said.
