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, utilizing blockchain technology to issue deposit tokens for government expenditure as part of a larger effort to modernize public fund management. According to local media reports, the ministry has received approval for the pilot under the 2026 regulatory sandbox program, which enables the use of digital currency for Treasury fund expenditure. The approved pilot will allow businesses to receive tokenized deposits for promotional expenses, currently processed through government purchasing cards. This move marks a significant shift from the long-standing system governed by the Treasury Funds Management Act, which previously required card-based payments. Within the sandbox environment, government agencies will be able to test new methods without being bound by existing regulations. Officials anticipate that the new system will enhance oversight, as token-based payments can be programmed with specific conditions, such as spending limits and eligible industries. This is expected to reduce the need for manual audits, particularly for transactions that occur outside regular hours. By removing intermediaries like card networks, the ministry expects to lower transaction fees for small businesses that receive government payments. This is the second instance of deposit tokens being used in Treasury operations, following a previous pilot related to subsidies for electric vehicle-charging infrastructure. The trial is scheduled to take place in Sejong City, with participating firms to be selected through a separate process. If the program demonstrates improved control over spending and significant cost savings, the ministry plans to expand it further.