Japan launches the Canton network verification pilot and tests government bonds as digital collateral

JPX Japan Exchange Group’s Japan Securities Clearing Company (JSCC) and Mizuho Financial Group, Nomura Holdings, and Digital Asset have announced the launch of a concept proof-of-concept (PoC) project based on the Canton network. The initiative aims 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-chain

The mission of this project is to examine the suitability of transferring and managing Japanese government bonds in a blockchain environment. The technical team will, under the framework of the “Act on Book-Entry Transfers of Corporate Bonds and Shares” and the “Financial Instruments and Exchange Act,” verify whether, within a multi-tier account management system, rights transfers and ledger-record updates can be seamlessly completed through distributed ledger technology. This test is not only a technical exercise, but also focuses on ensuring that digitalized operations do not conflict with existing regulations. The Japan Financial Services Agency (JFSA) has included this project in the support scope of the “Payment Innovation Program” (PIP) in February 2026, indicating the regulator’s high level of attention to upgrades of financial technology infrastructure.

Testing the feasibility of Canton’s blockchain infrastructure operating 24/7

The project uses the Canton blockchain infrastructure that supports Digital Asset to evaluate performance after integrating existing financial systems with new technology. Key tests include assessing the possibility of supporting 24/7 operation and the ability to handle complex real-time collateral transactions. Since traditional bond markets are constrained by business hours and clearing processes, by managing collateral digitally, researchers hope to reduce the administrative burden of storing and replacing collateral. This is intended to improve operating efficiency for financial institutions and investors by reducing expenses through automated processes, and will also review cross-application use cases among various entities such as clearing houses, institutional investors, and agents.

Japan explores a cross-border government bond collateral market

As the application of digital assets accelerates in international markets, this new attempt signals that Japan wants to leverage new technology to strengthen Japanese government bonds into globally recognized eligible collateral. The PoC covers cross-border transaction scenarios involving stakeholders both inside and outside the country. Canton previously completed tokenized Japanese government bond collateral testing with a U.S. bank and Société Générale in December 2025. In addition, the UK government also designated HSBC’s Orion platform for a digital gilt bond pilot at the beginning of 2026. Japan’s participation symbolizes that major global bond markets are collectively upgrading to blockchain infrastructure, creating new value for financial transactions. Although a specific commercialization timeline has not yet been confirmed, the trial results will serve as an important reference indicator for Japan’s future revisions to internal rules and functional improvements. By lowering management costs and improving the sophistication of collateral management, it will help promote broader use of Japanese government bonds among domestic and international institutional investors.

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