Governments test onchain bonds, UBI with compliance hurdles
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Hong Kong, Thailand, and the Marshall Islands are examining tokenized debt instruments and the use of onchain systems to administer social benefit programs.
Blockchain infrastructure can support the distribution of social benefits, but significant compliance considerations persist, according to Julie Myers Wood, chief executive of compliance and monitoring consultancy Guidepost Solutions.
Guidepost Solutions advised the Republic of the Marshall Islands on regulatory compliance and sanctions controls for its USDM1 bond, a government-issued tokenized instrument backed 1:1 by short-term U.S. Treasuries.
The Marshall Islands introduced a Universal Basic Income (UBI) program in November 2025, providing quarterly payments to citizens via a mobile wallet.
Wood said that any benefit currently delivered through analog channels should be assessed for digital distribution to accelerate delivery and establish an auditable record of allocations and spending.
The market for non-US tokenized government debt instruments continues to grow. Source: RWA.XYZ
Multiple governments are evaluating tokenized debt offerings and onchain benefit delivery to reduce settlement delays and transaction costs by streamlining issuance and clearing.
Compliance and sanctions obligations remain central as tokenized bond markets expand
Lower costs and near-instant settlement for tokenized bonds and other onchain assets can broaden access to financial services for individuals without traditional banking.
However, anti-money laundering (AML) controls and sanctions screening represent major regulatory risks for public tokenized bond issuances, Wood noted. Issuers must also collect know-your-customer (KYC) information to ensure funds are directed to the correct beneficiaries.
The tokenized US Treasury market has grown by over 50x since 2024. Source: Token Terminal
The tokenized bond market could reach $300 billion, according to a forecast by Lamine Brahimi, co-founder of Taurus SA, an enterprise-focused digital asset services firm.
Brahimi added that shorter settlement times, reduced transaction fees, and asset fractionalization, which allows investors to purchase portions of an asset, can expand participation in global financial markets.
Disclaimer: This article is intended to provide accurate and timely information. Readers are encouraged to verify details independently.
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