A New Chapter for Treasuries: DTCC and Digital Asset Move Toward Tokenized Government Bonds on Canton

The Depository Trust & Clearing Corporation (DTCC) and software firm Digital Asset announced a pilot to tokenise U.S. Treasury securities on Digital Asset’s Canton Network. The experiment pairs DTCC’s custody and mapping work with Canton’s private ledger model to create token representations of Treasuries that can move and settle in near real time while staying tied to the legacy book‑entry system.

For market participants the announcement is big because Treasuries sit at the center of cash and collateral markets. If the pilot scales, it could change how trades settle, how dealers manage intraday funding, and how custodians and central counterparties interact. At the same time, the move brings a raft of legal and operational questions that will determine whether tokenised Treasuries become a practical market standard or a niche overlay for specialised trading desks.

What the pilot actually does and who does what

This is not an attempt to replace the legacy ledger inside the Depository Trust Company (DTC). Instead, the teams plan to create tokenised versions of existing Treasury positions on the Canton Network, then map those tokens back to the DTC book‑entry records. In plain terms: the DTC record remains the legal master, while a token acts as a tradable proxy that can move faster on a modern ledger.

Digital Asset supplies the Canton Network, a permissioned, privacy‑focused ledger that supports programmable assets and interoperable workflows. Canton emphasises strong cryptographic controls and a model that enforces contractual rules across participants. DTCC contributes custody mapping and its market plumbing expertise: the idea is to keep DTC’s legal protections while letting participants settle exchanges of the tokenised proxy more quickly.

Operationally the pilot layers three pieces together. First, a token standard and identity scheme on Canton will represent the Treasury claim. Second, DTCC/DTC will maintain a mapping — a link between the token and the DTC ledger so that every token can be traced to a legal DTC position. Third, settlement and trade messaging will be coordinated so that delivery versus payment (DVP) semantics are preserved even if the token moves on Canton before or instead of a traditional DTC movement.

That coordination is essential. The teams say the mapping will ensure buyers continue to hold the same legal interest they would in the legacy system. But making that guarantee work in stressed or edge cases — failed trades, operative insolvencies, or cyber incidents — is the technical and legal challenge the pilot must prove it can meet.

How tokenised Treasuries could change liquidity and trading

If the pilot succeeds, the most visible market impact would be faster, more flexible settlement and new intraday liquidity patterns. Currently, many Treasury trades settle using DTC’s end‑of‑day cycles and intraday bank lines. Tokenised proxies that can move near real time would let counterparties exchange claims without always waiting for the legacy batch processes.

For dealers and repo desks that could mean lower intraday credit needs and simpler collateral re‑use. A token that can be transferred instantly allows a repo counterparty to deliver and reuse collateral within the same day more easily. That may reduce the need for large intraday lines from banks and could lower financing costs for some players.

Secondary trading could become more continuous and segmented. Electronic venues using token rails would offer near‑instant transfers for participants on the same network, while the legacy system would still serve broader market participants. That duality could create price spreads between on‑ledger and off‑ledger liquidity pools and may favour market makers who link both worlds efficiently.

There’s also potential knock‑on effects for benchmark calculations and market data. If volume moves to tokenised rails, tape consolidators and benchmark committees will need to decide how to treat on‑ledger transactions in official pricing and volumes. Until those rules exist, some liquidity might stay in the legacy pool to preserve transparency and benchmark inclusion.

Regulatory, legal and custody questions that will shape adoption

Tokenising Treasuries raises many of the same legal questions that have followed other tokenised securities pilots — and a few unique ones because Treasuries are central bank‑backed instruments. The core issue is legal finality and ownership: U.S. securities law, trust and custody regulations assume a certain chain of title and a centralised book‑entry record. Any token scheme must preserve that legal backbone or regulators may insist the token is merely a convenience layer, not a new record of ownership.

Regulators will want clarity on settlement finality, especially where central bank accounts are concerned. Moving a token on a private network is not the same as moving central bank money. Participants will need clear processes to convert token transfers into movements of central bank reserves or commercial bank balances so that payment and settlement netting remains correct.

Custody rules will be tested too. Custodians currently rely on DTC to provide legal custody opinions and client protections. If tokens are used operationally, custodians — and the lawyers who advise them — will demand certainty that token possession equates to legal custody of the underlying Treasury claim. DTCC’s role as an infrastructure provider helps bridge that gap, but the pilot must prove the mapping is robust under stress.

Finally, regulators will watch concentration and systemic risk. The DTCC sits at the center of U.S. market plumbing; adding a tokenised layer around its records could increase operational centralisation even as it modernises rails. Authorities will balance efficiency gains against the risks of new single points of failure, vendor lock‑in, and cross‑border legal frictions.

What investors and trading desks should do next

Treat this moment as the start of a long, careful rollout, not an overnight market revolution. Expect a staged pilot that focuses on narrow use cases — for example, intraday repo between matched dealers on the Canton Network — before broader market access. That means operational changes will be incremental and concentrated among dealers, large custodians, and tech‑forward asset managers first.

Operationally, trading desks should prioritise connectivity and dual‑rail readiness. Firms that can route trades and collateral between legacy DTC flows and token rails will have a competitive edge. For middle and back offices, the key practical work will be reconciling token movements with DTC ledgers in real time and building controls for emergency unwind scenarios.

On risks: counterparty and concentration risk are real. Relying on a single mapping service or network vendor creates new operational concentration. Cybersecurity and governance of private ledgers will be under intense scrutiny. Legal risk remains a wildcard — until courts and regulators spell out how tokenised proxies map to beneficial ownership, some firms will limit their exposure.

What to watch next: pilot scope and participant list, legal opinions on custody and finality, central bank and SEC commentary, and any production‑grade interoperability work that ties token movements to central bank money. If those pieces line up, tokenised Treasuries could lower some friction in money‑market plumbing. If not, the effort may settle into a specialist niche used for particular collateral workflows rather than reshaping the broader Treasury market.

For investors and market‑structure professionals, the right mental model is cautious optimism. The technology promises tangible efficiency gains, but the industry and regulators will judge success by whether tokenisation preserves the legal, liquidity and resilience qualities that make Treasuries the safest corner of financial markets today.

Sources

• cryptonews.com