The tokenized bond market is projected to reach $300 billion, driven by benefits such as lower transaction costs and improved settlement times. Several governments are now investigating the use of blockchain technology to administer social benefit programs, aiming to streamline processes and reduce costs associated with traditional finance.
Julie Myers Wood, CEO of Guidepost Solutions, highlighted ongoing compliance challenges, particularly regarding anti-money laundering (AML) and know-your-customer (KYC) requirements. The firm has been advising the Republic of the Marshall Islands on regulatory frameworks for its USDM1 bond, a debt instrument backed by US Treasuries.
The government of the Marshall Islands plans to implement a Universal Basic Income (UBI) program in November 2025, utilizing mobile wallets for direct quarterly benefit distributions. Wood emphasized the importance of digital delivery methods, stating that they enhance efficiency and create an auditable trail for financial transactions.
As the market for non-US tokenized debt instruments expands, the urgency to address regulatory compliance remains critical for governments looking to issue bonds on-chain. Data from Token Terminal indicates that the tokenized US Treasury market has experienced unprecedented growth, increasing by more than 50 times since 2024.