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 public fund management. 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 to disburse Treasury funds. The approved pilot will allow business promotion expenses, currently processed using government purchasing cards, to be paid using tokenized deposits, thus altering a long-standing system governed by the Treasury Funds Management Act that required card-based payments. In the sandbox environment, government agencies will be allowed to operate outside these rules on a limited basis to test new methods, with officials expecting the change to enhance oversight. Token-based payments can be programmed with predefined conditions, including limits on when funds can be used and which industries can accept them, potentially reducing the need for manual audits, especially when spending occurs outside standard hours. The system also eliminates intermediaries such as card networks, which the ministry believes could lower transaction fees for small businesses receiving government payments. This initiative marks the second use of deposit tokens 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, with the ministry planning to expand the program if it demonstrates stronger control over spending and measurable cost savings.