Roughly 1.4bn adults around the world remain unbanked, with the greatest exclusion concentrated in sub-Saharan Africa and southeast Asia. At the same time, sovereign bonds in these regions are often issued in large denominations and dominated by foreign institutional investors, limiting access for local retail investors and exposing governments to significant foreign exchange risk.
Tokenisation can directly address these structural barriers. By issuing bonds in local currencies and lower denominations, governments can democratise access to public debt, engage domestic and diaspora populations, and reduce reliance on external capital. What began as a trend in developed financial markets may prove transformative where needed most.
Debt tokenisation as a force for good
Blockchain technology and the tokenisation of sovereign debt present promising solutions to four long-standing challenges.
The first challenge is disengaged diaspora communities. Governments can offer secure, low-denomination sovereign bonds via blockchain, meaning expatriates can reinvest in their home countries with transparency and efficiency. This provides a new avenue for public fundraising while strengthening ties between overseas citizens and domestic development goals.
Second, tokenised debt can be denominated in local currencies, offering an effective tool for reducing foreign exchange mismatches and heightened risk. Foreign-currency borrowing has historically amplified debt vulnerabilities in many emerging markets, exposing countries to volatility and external shocks. These foreign-currency liabilities are difficult to hedge due to the illiquidity and non-convertibility of many emerging market currencies, compounding debt sustainability challenges. By removing foreign exchange risks from the equation, local-currency tokenised issuance provides a path to more sustainable debt servicing. This enables governments to manage their public debt levels and fiscal spending.
The third challenge is low retail participation. Traditionally, debt issuances are issued through a complex network of intermediaries and are only accessible to investors with bank and brokerage accounts. Especially in emerging countries, these financial instruments are out of reach for most retail investors. Tokenisation offers a way to leapfrog the existing infrastructure evolution, redesigning the user journey from the ground up, enabling retail investors to purchase, hold and settle tokenised sovereign bonds in their digital wallets. Transactions are near-instant, transparent and accessible across borders, eliminating traditional barriers for diaspora communities and underserved populations. In this new model, financial inclusion is no longer just a policy goal but embedded in the infrastructure.
Fourth is a lack of product innovation. Tokenisation can change the way governments approach retail bonds, moving beyond traditional bond programmes to more tailored offerings. With programmable features, governments can issue bespoke structures such as standard-of-living bonds, which adjust returns based on inflation to preserve real income, forward-starting bonds, which activate at a future date to better match funding needs, and income-only securitised bonds which offer predictable cashflows without principal repayment obligations. There are also birthright bonds, designed as long-term savings for newborn citizens, and lottery bonds, which gamify savings by embedding prize-linked returns. These programmable structures expand both the use case and appeal of sovereign debt.
Key design considerations for governments
Governments considering tokenisation of sovereign debt should build upon insights from the market’s experiences of tokenisation. Much of recent market development shows that even well-designed systems can break down if core risks aren’t addressed.
Perhaps the most overlooked insight is that ‘bankruptcy remote’ is not enough to protect investors. In traditional models, investors must often interact with multiple intermediaries – platforms, custodians or fund vehicles – each introducing counterparty and operational risks. By leveraging tokenisation to issue debt directly to individual investors through secure, regulated channels, governments have the rare opportunity to remove these layers of risk altogether. Instead of building complex wrappers, digital issuance should be natively issued bearer instruments that are directly held, transparently recorded and resilient to intermediary failure.
There is now a clear market recognition that institutional-grade technology alone is insufficient; best-in-class governance, legal frameworks and operational discipline must complement it. Recent failures – from high-profile exchange collapses to governance breakdowns at decentralised finance projects – have shown that technology without robust oversight creates the illusion of safety without its substance.
For governments, the risks are even more acute: public sector projects carry a fiduciary responsibility to citizens, requiring partners who not only understand technical delivery but operate with an institutional mindset, steeped in regulatory scrutiny, fiduciary standards and crisis management protocols. Building sovereign digital assets demands a higher calibre of partner – those for whom stability, transparency and the safeguarding of public trust are not ambitions, but obligations.
Finally, governments should proactively foster a vibrant tokenised ecosystem to fully unlock the benefits of sovereign debt tokenisation. These digital government bonds allow issuers to swiftly create new digital money backed by high-quality collateral, enabling near-instantaneous money supply expansion in response to market needs. Equally critical, leveraging emerging clearing networks like Ubyx ensures that once stablecoins are issued, they can circulate fluidly between traditional and digital financial systems without friction. In this way, tokenised sovereign debt does not just replicate legacy systems in digital form, it provides the raw material for a more agile, resilient and interoperable financial future.
Building it right matters
Libeara built the tokenisation platform that underpins the successful deployment of Project Genesis, enabling investors to directly subscribe to programmable digital green bonds. These bonds feature automatic coupon payments and maturity tracking and real-time environmental, social and governance impact monitoring. The platform also integrates with digital wallet infrastructure, allowing seamless custody, transfer and settlement of tokenised bonds without reliance on traditional intermediaries.
In a scenario where digitally native bonds and cash are freely mobile, we can also begin to imagine a world where fiscal and monetary policy can be integrated in ways never possible before, equipping governments with new tools to strengthen resilience of the economy.
Aaron Gwak is Founder and Chief Executive Officer and Christopher Ngoi is Chief Strategy and Business Officer of Libeara.
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