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 larger effort to modernize public fund management. According to local media reports, the ministry has secured approval for the pilot under the 2026 regulatory sandbox program, which will enable the use of digital currency to disburse Treasury funds. The approved pilot will allow businesses to utilize tokenized deposits to cover promotional expenses, which are currently processed using government-issued purchasing cards. This move 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 regulatory sandbox environment, government agencies will be permitted to operate outside these rules on a limited basis to test innovative approaches. Government officials anticipate that this change will enhance oversight and transparency. Token-based payments can be programmed with specific conditions, including restrictions on when and how funds can be used, as well as which industries are eligible to receive them. This is expected to reduce the need for manual audits, particularly in cases where spending occurs outside regular working hours. Furthermore, the new system eliminates intermediaries such as card networks, which, according to the ministry, could lead to 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.