South Korea is exploring the tokenization of government bonds for improving settlement efficiency and automating central bank operations. This week, the Bank of Korea (BoK) put in place an asset tokenization unit to study and work on bringing sovereign debt onchain. The process will be overseen by South Korea’s Digital Currency Office that was established in July 2025.
Converting government bonds into programmable digital assets allow central banks to enable nearly instant settlement alongside fueling 24/7 trading and repo operations. Not just South Korea but other regions like Hong Kong, the U.K., and the Europe are also foraying into the tokenization of government bonds.
This development aligns with Seoul’s Virtual Asset User Protection Act that had gone live in 2024. In the coming months, the move could enable fractional ownership of government bonds for retail and institutional investors within legal parameters.
While multiple nations are talking about the tokenization of real-world assets (RWAs) as the next big thing in global finance, industry analysts have raised alarms.
Professor Alistair Milne of the Loughborough Business School has argued that tokenized deposits are largely hyped marketing.
In a statement shared with The Coin Headlines Milne said that existing, conventional banking systems can already be programmed to perform automated, 24/7 transactions without needing complex blockchain technology.
“Much of the current discussion suggests tokenized deposits will transform banking. My research indicates that the technology itself is not the key issue. Most of the promised advantages can already be achieved using conventional banking systems,” Milne said. “In many cases, tokenized deposits are better understood as a new way of packaging existing capabilities rather than a fundamentally new form of money.”
He pointed out that while tokenization allows a single bank to automate and streamline internal money transfers, the real challenge arises during cross-bank transactions.
Eventually because moving funds between different institutions still largely depends on complex interbank settlement systems, regulatory compliance, and risk control which tokenized assets alone cannot eliminate, the Professor of Financial Economics at the U.K.-based university said.
He also highlighted that the cross-border interoperability of tokenized assets still remain key risks for crypto, DeFi, and the broader tokenized securities markets.
Kyle Sonlin, the Co-Founder and President at Global Settlement (GSX), also recently echoed a similar sentiment. He said tokenization is more about adopting the onchain infrastructure instead of a liquidity gurantee.
“I believe a common misconception is that tokenization automatically makes an asset more liquid. While it can make ownership easier to record and settle, it cannot create demand where there is none. Ultimately, institutions still have to look at the quality of the asset, who can hold it, and how cash moves when the transaction closes,” Sonlin had told The Coin Headlines in an exclusive interview.
The International Monetary Fund (IMF) has projected that tokenization could moving markets closer to shared ledgers and enable faster settlements.
