Blockchain technology is an effective medium for administering social benefits programs, but key compliance challenges remain, according to Julie Myers Wood, CEO of consulting firm Guidepost Solutions.
Guidepost Solutions advised the Government of the Republic of the Marshall Islands on the regulatory compliance and sanctions framework for USDM1 Bonds, a government-issued tokenized debt instrument backed 1:1 by short-term US Treasuries.
In November 2025, the Government of the Marshall Islands launched the Universal Basic Income (UBI) program, which pays quarterly benefits to citizens directly via mobile wallet. Wood told Cointelegraph:
“Any benefits that are currently distributed through analog means should be considered for digital delivery options for several reasons. Digital delivery speeds up the process and can provide a verifiable path to delivery and spending.”
Several governments are exploring tokenized debt instruments and administering onchain welfare programs to eliminate settlement delays and costly transaction fees inherent in time-honored finance by disintermediating the issuance and settlement process.
Related: The UK government appoints HSBC to pilot tokenized bonds
Compliance and sanctions challenges remain as the tokenized bond market develops
The cost reduction and near-instant settlement times of tokenized bonds and other onchain instruments democratize access to the financial system for individuals who do not have access to time-honored banking infrastructure.
However, anti-money laundering (AML) requirements and sanctions compliance are two of the biggest regulatory risks for governments issuing public onchain bonds, Wood told Cointelegraph.
She added that governments issuing tokenized bonds must also collect know-your-customer (KYC) information to ensure funds are directed to the right recipients.
According to.the tokenized U.S. Treasury bond market has grown more than 50 times since 2024 data from the Token Terminal cryptocurrency analysis platform.
The market for tokenized bonds could grow to $300 billion, according to a forecast by Lamine Brahimi, co-founder of Taurus SA, an enterprise-focused digital asset services company.
Faster settlement times, transaction costs and asset fractionation, which allows individuals to purchase fractions of financial assets, are increasing investor access to the global financial system, Brahimi told Cointelegraph.
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