Blockchain technology is an effective way to administer welfare benefit programs, but major compliance challenges remain, according to Julie Myers Wood, CEO of compliance and monitoring consulting firm Guidepost Solutions.
Guidepost Solutions advised the Government of the Republic of the Marshall Islands on a regulatory compliance and sanctions framework for its USDM1 bond, a symbolic debt instrument issued by the government, backed 1:1 by short-term U.S. Treasury bonds.
The Government of the Marshall Islands launched a universal basic income (UBI) program in November 2025, which distributes quarterly benefits to citizens directly via a mobile wallet. Wood told Cointelegraph:
“Any benefit currently 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 procurement and spending.”
Several governments are explore tokenized debt instruments and administer social benefit programs online to eliminate settlement delays and costly transaction fees inherent in traditional finance in disintermediation of the issuance and clearing process.
Related: UK government appoints HSBC for token bond pilot
Regulatory compliance and sanctions challenges remain as tokenized bond market grows
The reduced costs and near-instant settlement times of tokenized bonds and other on-chain instruments are democratizing access to the financial system for people who do not have access to traditional banking infrastructure.
However, Anti-Money Laundering (AML) Requirements and sanctions compliance are two of the biggest regulatory risks for governments issuing on-chain bonds to the public, Wood told Cointelegraph.
Governments issuing token bonds must also collect know your customer (KYC) information to ensure funds are directed to the correct recipients, she added.
The US Treasury tokenized market has multiplied by more than 50 since 2024according to data from the Token Terminal crypto analysis platform.
The symbolic bond market could climb to 300 billion dollarsaccording to the predictions of Lamine Brahimi, co-founder of Taurus SA, an enterprise-focused digital asset services company.
Reducing settlement times, transaction costs and asset splitting, which allows individuals to purchase fractions of a financial asset, expands investor access to the global financial system, Brahimi told Cointelegraph.
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