South Korea to Introduce Blockchain-Based Deposit Tokens for Public Expenditure in Q4

The South Korean Ministry of Economy and Finance is set to launch a pilot program in the fourth quarter to test the use of blockchain-based deposit tokens for government expenditure as part of a broader initiative to modernize the management of public funds. According to local media reports, the ministry has obtained approval for the pilot program under the 2026 regulatory sandbox initiative, which will enable the use of digital currency to disburse Treasury funds. The approval will allow for the use of tokenized deposits to cover business promotion expenses, which are currently processed using government purchasing cards. This change marks a significant shift from the traditional system governed by the Treasury Funds Management Act, which mandated the use of card-based payments. In the sandbox environment, government agencies will be permitted to operate outside these rules on a limited basis to test innovative methods. Government officials anticipate that this change will enhance oversight, as token-based payments can be programmed with predefined conditions, including restrictions on when funds can be utilized and which industries can accept them. This could lead to a reduction in manual audits, particularly when spending occurs outside standard hours. The new system also eliminates intermediaries, such as card networks, which the ministry believes could result in lower transaction fees for small businesses receiving government payments. This initiative represents the second instance of deposit tokens being used in Treasury operations, following an earlier pilot program related to subsidies for electric vehicle-charging infrastructure. The trial is scheduled to take place in Sejong City, following a selection process for participating firms, as stated in the report. The ministry plans to expand the program if it demonstrates improved control over expenditure and yields measurable cost savings.