South Korea to Introduce Blockchain-Based Tokens for Government 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 received approval for the pilot under a 2026 regulatory sandbox program, which will enable the use of digital currency for Treasury fund expenditure. The approved pilot will allow for the use of tokenized deposits to pay business promotion expenses, which are currently processed using government purchasing cards. This change marks a significant departure from the traditional system governed by the Treasury Funds Management Act, which mandated the use of card-based payments. In the sandbox environment, agencies will be permitted to operate outside these rules on a limited basis to test innovative methods. Officials anticipate that this change will enhance oversight, as token-based payments can be programmed with pre-defined conditions, including restrictions on when funds can be utilized and which industries can accept them. This could lead to a reduction in the need for manual audits, particularly when spending occurs outside standard hours. Furthermore, the system eliminates intermediaries such as card networks, which the ministry believes could result in lower transaction fees for small businesses that receive government payments. This initiative marks the second instance of deposit tokens being used in Treasury operations, following an earlier pilot related to subsidies for electric vehicle-charging infrastructure. The trial is scheduled to take place in Sejong City after a selection process for participating firms, and the ministry plans to expand the program if it demonstrates improved control over expenditure and measurable cost savings.