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 trial of blockchain-based deposit tokens for government expenditure in the fourth quarter, as part of a larger effort to modernize public fund management. According to local media reports, the ministry has obtained approval for a pilot program to utilize Treasury funds in the form of digital currency under the 2026 regulatory sandbox initiative. This approval enables the use of tokenized deposits to cover business promotion expenses, which are currently processed using government purchasing cards. The introduction of this new system marks a significant departure from the traditional framework governed by the Treasury Funds Management Act, which mandated the use of card-based payments. Within the sandbox environment, government agencies will be allowed to operate outside these rules on a limited basis to test innovative approaches. Government officials anticipate that this change will enhance oversight, as token-based payments can be pre-programmed with specific conditions, including restrictions on usage and eligible industries. This could lead to a reduction in manual audits, particularly for spending that occurs outside regular working hours. Furthermore, the system eliminates intermediaries such as card networks, which, according to the ministry, may result in lower transaction fees for small businesses receiving government payments. This initiative marks the second instance of deposit tokens being used in Treasury operations, following an earlier pilot project 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, as stated in the report. The ministry plans to expand the program if it demonstrates improved control over expenditure and yields measurable cost savings.