Japan Securities Clearing Corporation, part of Japan Exchange Group, said on April 20 that it has started a proof-of-concept trial to test the use of Japanese government bonds as digital collateral on the Canton Network.
The project brings together JSCC, Mizuho Financial Group, Nomura Holdings, and Digital Asset. The trial will focus on Japanese government bonds whose rights are transferred under Japan’s Book-Entry Transfer Act.
The group said it will examine whether those rights and the related record updates can move through a structure involving multiple account management institutions by using blockchain technology.
The companies said the work will test both legal and practical issues. The aim is to see whether JGBs can be transferred and managed onchain while keeping their legal status under the Book-Entry Transfer Act and the Financial Instruments and Exchange Act.
The project marks another step in the effort to connect traditional finance systems with blockchain-based infrastructure.
Instead of announcing a product launch, the group framed the initiative as a test designed to examine how digital collateral management could work in practice in Japan’s bond market.
Trial covers 24/7 and cross-border use
JSCC said the proof of concept will test whether existing systems can be integrated with Canton’s blockchain infrastructure to support real-time collateral transactions on a 24/7 basis. The companies also said the scope will include cross-border transactions involving stakeholders in and outside Japan.
According to the official release, the project will review use cases involving collateral transfers among clearing houses, institutional investors, clients, and agents. It will also look at how current laws and regulations apply to those transfers and whether internal rules would need to change before any future commercial use.
The group said the test will examine whether blockchain can reduce the manual work linked to posting and substituting collateral. In the release, the participants said the goal is to improve operational efficiency and reduce costs for both financial institutions and investors by combining existing infrastructure with blockchain-based processes.
Canton was described in the release as “the only blockchain purpose-built for institutional finance.” The trial is therefore being positioned around practical market infrastructure rather than retail crypto trading. The core issue is whether sovereign bonds that already hold a central role in institutional finance can move in a more efficient way without losing their legal treatment under Japanese law.
FSA backs the project
The companies said the proof of concept was selected in February 2026 for support under the Payment Innovation Project of Japan’s Financial Services Agency. The initiative is part of the regulator’s FinTech PoC Hub, which supports testing around new payment and market infrastructure models.
That support gives the project a policy link as well as a market link. The trial is not only about technology performance. It is also about whether digital collateral processes can fit within Japan’s legal and regulatory framework for securities and post-trade systems.
In the background section of the release, the companies said the use of digital assets is advancing quickly in the United States and other markets outside Japan, while momentum is also building inside Japan.
They described digital collateral management for JGBs as “an urgent priority” because those bonds are widely regarded as “eligible collateral” by institutional investors in Japan and overseas.
The participants added that they want to maintain and strengthen the availability and liquidity of JGBs in digital markets. They also said enabling JGBs to be managed on blockchain could deepen coordination with other digital assets and support new types of financial transactions.
Japan joins bond digitization push
The JGB trial comes as governments and financial firms in several markets test digital versions of core market functions.
An earlier Canton pilot in late 2025 explored the use of tokenized US Treasuries as real-time collateral among major financial institutions, while UK authorities have also explored distributed ledger technology in sovereign debt infrastructure through digital gilt testing.
These efforts point to growing interest in using government securities in faster, always-on collateral systems. Moreover, Japan’s project stands out because it involves one of the world’s largest sovereign bond markets and places legal treatment at the center of the test.
The official release makes clear that the participants are not only testing technical transfers. They are also checking whether JGB rights can move through blockchain-based systems while the bonds remain valid under current laws and market rules.
The companies did not announce a commercial rollout or a launch date for live use. Instead, they said the proof of concept will consider what functional improvements may be required for commercialization and whether changes to internal rules may be needed.