Onchain Public Benefits: Promising Future Amid Compliance Hurdles
Governments in regions such as Hong Kong, Thailand, and the Marshall Islands are actively investigating tokenized debt securities and implementing social welfare initiatives directly on blockchain networks.
Blockchain systems offer a powerful platform for managing and distributing social benefit programs, though significant regulatory and compliance obstacles persist, as noted by Julie Myers Wood, the chief executive officer of Guidepost Solutions, a firm specializing in compliance and monitoring consultancy services.
Guidepost Solutions provided expert guidance to the Republic of the Marshall Islands’ administration, helping develop a comprehensive regulatory compliance and sanctions structure for its USDM1 bond. This innovative financial product represents a tokenized debt instrument issued by the government itself, fully backed on a one-to-one basis by short-term United States Treasuries.
In November 2025, the Marshall Islands government rolled out a Universal Basic Income (UBI) initiative, which delivers quarterly payments to eligible citizens straight into their mobile digital wallets. During an interview with Cointelegraph, Wood emphasized:
“Every type of benefit that is presently handled through traditional paper-based or manual methods ought to be evaluated for potential digital distribution alternatives. There are multiple compelling advantages to this approach: it accelerates the entire delivery timeline and establishes a transparent, verifiable audit trail for both the allocation of funds and their subsequent expenditures.”
The marketplace for tokenized government debt instruments outside the United States is experiencing steady expansion. This trend underscores the increasing appeal of blockchain-based financial solutions for sovereign issuers.
A growing number of national authorities are delving into the use of tokenized debt products and onchain mechanisms for social welfare distribution. These efforts aim to bypass the prolonged settlement periods and exorbitant fees typical of conventional financial systems by streamlining the issuance and clearing procedures through disintermediation.
Regulatory Compliance and Sanctions Pose Ongoing Challenges in Expanding Tokenized Bond Sector
The advantages of tokenized bonds and similar onchain financial tools are profound: they slash operational costs and enable virtually instantaneous settlement processes. In doing so, they open up the financial ecosystem to countless individuals who have historically been excluded from legacy banking services due to infrastructural limitations or geographic barriers.
Nevertheless, adherence to anti-money laundering (AML) protocols and sanctions regulations stands out as two of the most pressing regulatory hurdles for governments venturing into public issuance of onchain bonds, according to Wood’s insights shared with Cointelegraph.
Moreover, authorities issuing these digital bonds are obligated to gather know-your-customer (KYC) data to guarantee that disbursements reach the intended beneficiaries without deviation or misuse.
Recent analytics reveal that the sector for tokenized United States Treasuries has skyrocketed by more than 50 times since the beginning of 2024, highlighting the explosive adoption of onchain finance solutions, as reported by crypto analytics provider Token Terminal.
Looking ahead, projections from Lamine Brahimi, co-founder of Taurus SA—a company dedicated to enterprise-grade digital asset infrastructure—suggest that the overall tokenized bond industry could balloon to as much as $300 billion in the coming years.
Brahimi elaborated to Cointelegraph on the transformative benefits, including dramatically shortened settlement durations, minimized transaction expenses, and the revolutionary concept of asset fractionalization. This last feature empowers everyday investors to acquire small portions of high-value financial assets, thereby broadening participation in the worldwide financial markets to an unprecedented degree.
