South Korea to Introduce Blockchain-Based Deposit 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 public fund management. According to local media, the ministry has obtained approval for the pilot program under the 2026 regulatory sandbox initiative, which will involve the use of digital currency to disburse Treasury funds. The approved pilot will enable the use of tokenized deposits to cover business promotion expenses, which are currently processed using government purchasing cards. This development 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 allowed to operate outside the existing regulations on a limited basis to test innovative methods. Government officials anticipate that the new system will enhance oversight, as token-based payments can be programmed with predefined conditions such as spending limits and industry-specific usage. This is expected to reduce the need for manual audits, particularly in cases where spending occurs outside regular hours. The system will also eliminate intermediaries such as card networks, which could lead to lower transaction fees for small businesses that receive government payments, according to the ministry. This is 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 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 measurable cost savings.