Blockchain technology is an effective medium for administering social benefit programs, but key compliance challenges remain, according to Julie Myers Wood, CEO of compliance and monitoring consulting firm Guidepost Solutions.
Guidepost Solutions advised the Republic of the Marshall Islands’ government on a regulatory compliance and sanctions framework for its USDM1 bond, a tokenized debt instrument issued by the government, backed 1:1 by short-term US Treasuries.
The Marshall Islands government launched a Universal Basic Income (UBI) program in November 2025 that distributes quarterly benefits to citizens directly through a mobile wallet. Wood told Cointelegraph:
“Any benefit that is currently being distributed through analog means should be explored for a digital delivery option for several reasons. Digital delivery speeds up the process and can provide an auditable trail for provisioning and expenditures.”
Several governments are exploring tokenized debt instruments and administering social benefit programs onchain to eliminate settlement delays and costly transaction fees inherent in traditional finance by disintermediating the issuing and clearing process.
Related: UK government appoints HSBC for tokenized bond pilot
Regulatory compliance and sanctions challenges remain as the tokenized bond market grows
The cost reduction and near-instant settlement times for tokenized bonds and other onchain instruments democratize access to the financial system for individuals who lack access to traditional banking infrastructure.
However, anti-money laundering (AML) requirements and sanctions compliance are two of the biggest regulatory risks for governments issuing onchain bonds to the public, Wood told Cointelegraph.
Governments issuing tokenized bonds must also collect know-your-customer (KYC) information to ensure that funds are directed to the proper recipients, she added.
The tokenized US Treasury market grew by over 50x since 2024, according to data from crypto analysis platform Token Terminal.
The tokenized bond market could surge to $300 billion, according to a forecast from Lamine Brahimi, co-founder of Taurus SA, an enterprise-focused digital asset services company.
Reduced settlement times, transaction costs and asset fractionalization, which allows individuals to purchase fractions of a financial asset, all expand investor access to the global financial system, Brahimi told Cointelegraph.
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