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

Japan’s Securities Settlement Corporation, together with industry giants such as Mizuho and Nomura, has launched a test of Japanese government bond digital collateral based on the Canton network. Through blockchain technology, it aims to enhance cross-border asset liquidity and reduce operating costs for financial institutions.

Japan’s Securities Settlement Corporation (JSCC), under the Japan Exchange Group (JPX), has partnered with Mizuho Financial Group, Nomura Holdings, and Digital Asset to announce the launch of a proof of concept (PoC) project based on the Canton network. The project is designed to test the feasibility of using Japanese government bonds (JGBs) as digital collateral, improving 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 examine the suitability of transferring and managing Japanese government bonds in a blockchain environment. The technical team will, based on the framework of the “Companies Act and Share Transfer Law” and the “Financial Instruments and Exchange Act,” verify whether, within a multi-tier account management system, rights transfer and ledger record updates can be completed seamlessly through distributed ledger technology. This test is not only a technical trial; it also places emphasis on ensuring that digitalized operations do not contravene existing regulations. In February 2026, the Japan Financial Services Agency (JFSA) has included this project within the support scope of the “Payment Innovation Plan” (PIP), showing the regulator’s high level of attention to upgrades of financial technology infrastructure.

Assessing the possibility of Canton blockchain infrastructure operating 24/7

The plan adopts the Canton blockchain infrastructure supporting Digital Asset to assess the performance after integrating existing financial systems with new technology. Key tests include evaluating the possibility of supporting 24/7 operation and the ability to handle complex real-time collateral transactions. Traditional bond markets are constrained by business hours and clearing procedures. Through digitalized management, researchers expect to reduce the administrative burden of collateral storage and substitution. This is intended to improve operational efficiency for financial institutions and investors, reduce cost spending through automated processes, and also review cross-application use cases among various entities such as clearinghouses, institutional investors, and agents.

Japan explores a cross-border sovereign bond collateral market

With the application of digital assets in international markets accelerating, this new attempt means Japan intends to use new technology to strengthen Japanese government bonds as widely recognized high-quality eligible collateral. The proof of concept covers cross-border transaction scenarios involving stakeholders both inside and outside Japan. Canton previously completed a tokenized collateral test for U.S. government bonds in December 2025 with U.S. banks and Société Générale of France. In addition, the UK government also designated HSBC’s Orion platform for a digital gilts bond pilot in early 2026. Japan’s participation indicates that major sovereign bond markets worldwide are collectively upgrading to blockchain infrastructure, creating new value for financial transactions. Although a specific commercial rollout timeline has yet to be confirmed, the test results will serve as an important reference for Japan’s future revisions to internal rules and functional enhancements. By lowering management costs and improving the sophistication of collateral management, it will help promote broader use of Japanese government bonds by 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