Mitsubishi UFJ Morgan Stanley Securities Co. will advance a proof of concept for on-chain Japanese government bond (JGB) repo transactions under Mitsubishi UFJ Financial Group Inc. (MUFG) to strengthen the JGB business, President and CEO Hiroyuki Seki said during an interview with The Yomiuri Shimbun.

In repo transactions, or repurchase agreement transactions, institutional investors borrow short-term cash using bonds and other assets as collateral.

"With the full strength of MUFG, we will take on the challenge of building next-generation market infrastructure," Seki emphasized.

The following is excerpted from the interview.

The Yomiuri Shimbun: What do you want to strengthen in the JGB business?

Hiroyuki Seki: First, we will proceed with a proof of concept for bringing on-chain JGB repo transactions as a unified effort across the MUFG group. With the full strength of MUFG, we will take on the challenge of building next-generation market infrastructure.

Yomiuri: What is the outlook for repo transactions?

Seki: The JGB repo market continues to expand. In the proof of concept, we will conduct on-chain JGB repo transactions, while also evaluating such matters as the feasibility of using stablecoins and tokenized deposits as settlement methods.

In the medium to long-term, as the tokenization of JGBs progresses, it will become possible to have cross-currency repo transactions with U.S. dollar tokenized deposits and stablecoins, which are already being used. It will also become possible to conduct on-chain collateral swap transactions, in which JGBs and U.S. Treasuries are exchanged as collateral.

We believe this will also lead to a diversification of how Japanese financial institutions maintain and secure foreign currency liquidity, such as U.S. dollars. While advancing on-chain development that will enhance the efficiency and convenience of the entire JGB market, we aim to contribute to the development of the Japanese financial market as a whole.

Yomiuri: What are your thoughts on artificial intelligence?

Seki: Advances in digital technology will significantly change the presuppositions of the securities business. While digitalization and the use of AI will not eliminate the roles of white-collar workers, we believe that the nature of their job duties will be redefined with AI as a given.

For example, we may have AI handling clerical tasks while humans take on roles involving judgment, responsibility and accountability, as well as coordinating among multiple stakeholders and responding to unforeseen events. There is a possibility that this kind of division of labor will become a new standard.

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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.

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