The potential of blockchain technology to revolutionize the administration of social benefit programs is undeniable, but it comes with a significant set of regulatory and compliance challenges, according to Julie Myers Wood, CEO of Guidepost Solutions, a leading compliance and monitoring consulting firm.
Wood, whose firm advised the Republic of the Marshall Islands on the regulatory compliance and sanctions framework for its USDM1 bond, a tokenized debt instrument backed 1:1 by short-term US Treasuries, believes that the digital delivery of social benefits offers numerous advantages. “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,” she told Cointelegraph.
From Theory to Practice: The Marshall Islands’ UBI Program
The Republic of the Marshall Islands launched a Universal Basic Income (UBI) program in November 2025, which distributes quarterly benefits directly to citizens through a mobile wallet. This initiative is part of a growing trend among governments exploring tokenized debt instruments and onchain administration to streamline social benefit programs.
The Growing Market for Tokenized Bonds
The market for non-US tokenized government debt instruments is expanding, with several governments considering the use of blockchain to reduce settlement delays and transaction costs. According to data from RWA.XYZ, the market for these instruments continues to grow, driven by the efficiency and transparency that blockchain technology offers.
However, the growth of the tokenized bond market also brings regulatory challenges. Anti-money laundering (AML) requirements and sanctions compliance are two of the biggest regulatory risks for governments issuing onchain bonds to the public, Wood emphasized. “Governments issuing tokenized bonds must also collect know-your-customer (KYC) information to ensure that funds are directed to the proper recipients,” she added.
Democratizing Access to the Financial System
The tokenized US Treasury market has grown by over 50 times since 2024, according to data from crypto analysis platform Token Terminal. Lamine Brahimi, co-founder of Taurus SA, an enterprise-focused digital asset services company, forecasts that the tokenized bond market could surge to $300 billion. Reduced settlement times, lower transaction costs, and asset fractionalization, which allows individuals to purchase fractions of a financial asset, all contribute to expanding investor access to the global financial system.
Looking Ahead: Balancing Innovation and Regulation
As the use of blockchain in social benefit programs and tokenized bonds continues to evolve, the balance between innovation and regulation will be crucial. While the technology offers significant benefits in terms of efficiency and transparency, governments and regulatory bodies must work together to address the compliance challenges. “The key is to create a regulatory framework that supports innovation while ensuring that the system remains secure and compliant,” Wood concluded.
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