Japan launches Canton blockchain verification project! Can Japanese bonds become "digital collateral"?

Japan Securities Settlement Company, together with giants like Mizuho and Nomura, has launched a test of Japanese government bonds as digital collateral based on the Canton network. This aims to enhance cross-border asset liquidity and reduce operational costs for financial institutions through blockchain technology.

JPX Group’s Japan Securities Settlement Corporation (JSCC), in collaboration with Mizuho Financial Group, Nomura Holdings, and Digital Asset, announced the initiation of a proof of concept (PoC) project based on the Canton network. The project aims to test the feasibility of using Japanese government bonds (JGBs) as digital collateral to improve asset liquidity and management efficiency in financial markets.

Testing the transfer of Japanese government bonds (JGBs) on the blockchain

The task of this project is to verify the adaptability of transferring and managing Japanese government bonds within a blockchain environment. The technical team will evaluate, within the framework of the “Companies Act and Share Transfer Law” and the “Financial Instruments and Exchange Act,” whether rights transfer and ledger updates can be seamlessly completed through distributed ledger technology in a multi-tiered account management system. This test is not only a technical trial but also emphasizes ensuring that digital operations comply with existing regulations. The Financial Services Agency of Japan (JFSA) has included this project in February 2026 under the “Payment Innovation Plan” (PIP), demonstrating regulatory authorities’ high regard for upgrading financial technology infrastructure.

Testing the 24/7 operation capability of Canton’s blockchain infrastructure

The project utilizes Canton blockchain infrastructure supporting Digital Asset to assess the performance after integrating with existing financial systems. Key tests include the possibility of supporting continuous, round-the-clock operations and handling complex real-time collateral transactions. Traditional bond markets are limited by trading hours and clearing processes. Through digital management, researchers hope to reduce administrative burdens related to collateral storage and substitution. The goal is to improve operational efficiency for financial institutions and investors, reduce costs through automation, and review interaction use cases among entities such as clearinghouses, institutional investors, and agents.

Japan explores cross-border sovereign bond collateral markets

The application of digital assets in international markets is accelerating. This new initiative signifies Japan’s intention to leverage new technology to establish Japanese government bonds as highly recognized global eligible collateral. The proof of concept covers cross-border transaction scenarios involving domestic and international stakeholders. Canton previously completed a US Treasury bond tokenization collateral test in December 2025 with US banks and Société Générale of France. Additionally, the UK government designated HSBC’s Orion platform for a digital bond pilot in early 2026. Japan’s participation symbolizes a collective upgrade of major bond markets worldwide to blockchain infrastructure, creating new financial transaction values. Although specific commercial rollout timelines are not yet confirmed, the test results will serve as important references for future internal regulation revisions and feature enhancements in Japan. By reducing management costs and increasing collateral management precision, this initiative aims to promote broader use of Japanese government bonds among domestic and foreign institutional investors.

• This article is reprinted with permission from: “Chain News”
• Original title: “Japan Launches Canton Network Verification Project to Test Government Bonds as Digital Collateral”
• Original author: DW