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FollowingDeploying government bonds on the Canton Network: Mechanisms and Prospects
Deploying government bonds on the Canton Network means creating a digital token that represents the actual custody of bonds and allowing banks and funds to move the token on a shared ledger. The bonds themselves have not changed, but the form of their records. The token can be traded, pledged as collateral, or exchanged for cash, and only relevant participants can view details.
How government bond tokenization works
Tokenization is the recording of existing assets as transferable entries on the blockchain. On the Canton Network, the most famous case is the tokenization service of DTCC (American Depository Trust and Clearing Corporation). DTCC is the primary post-trading infrastructure for U.S. securities. In 2025, its subsidiaries processed US$470 trillion in transactions and held US$114 trillion in assets in custody.
DTCC calls each token a "digital twin." The process has three parts:
- Treasury bonds held by DTC (the custodian arm of DTCC) are converted into tokens.
- Tokens are delivered to the wallet chosen by the DTC participant.
- Holders can convert it back to traditional form.
DTCC stated that these tokens retain the same investor protection, rights and ownership rights as the original securities.
Why do institutions want to introduce bonds to the Canton Network?
Canton is a public Layer-1 blockchain designed specifically for regulated finance. The following three functions are particularly important to the bond market:
1. Privacy By Design
Each participant can only see the part of the transaction that involves himself or herself. Canton calls this "sub-transaction privacy." A bank that trades treasury bonds does not need to expose its positions to competitors.
2. Settlement In One Step
DVP means that bonds and cash move at the same time, otherwise neither move. No party can have only payment but not collection, or only collection but not payment.
3. Faster Collateral
Treasury bonds are common collateral in repo agreements, a short-term loan backed by bonds. Tokenized bonds can be directly pledged and mortgaged on the ledger.
Practical progress of Canton Network in 2026
The following four events demonstrate the practical application of this mechanism:
January: Lloyds Bank issued tokenized deposits on Canton and used these deposits to purchase tokenized British gilt bonds issued by Archax.
July 1: Franklin Templeton transferred a tokenized U.S. Treasury bond to Virtu Financial in exchange for the tokenized U.S. dollar USDCx in a transaction executed by Tradeweb.
July 15:DTCC processed production trades containing tokenized assets, including treasury bonds and repo DVP transactions. More than 30 institutions participated in the transaction.
October: DTCC plans to fully launch its tokenization service this month. The service covers Russell 1000 stocks, major index ETFs, and U.S. Treasuries, notes and bonds, and supports running on the Canton and LFDT Besu networks.
Conclusion
Deploying government bonds on the Canton Network provides institutions with a tokenized copy of bonds they already hold. The token retains the same legal rights, hides transaction details from the outside world, and can be settled in one step with cash. Currently, the network has processed tokenized US Treasury bonds and UK gilts in real-time trading, backed by data from Chainlink.
