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 the management of public funds. According to local media reports, the ministry has obtained approval for a pilot program to utilize digital currency for Treasury expenditures under a 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 shift from the traditional framework governed by the Treasury Funds Management Act, which previously mandated card-based payments. Within the sandbox environment, agencies will be allowed to operate outside these rules on a limited basis to test innovative methods. Government officials anticipate that this change will enhance oversight capabilities. Since token-based payments can be programmed with predefined conditions, including limitations on when and where funds can be utilized, the need for manual audits is likely to decrease, particularly in cases where spending occurs outside regular hours. Furthermore, the 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 represents 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, following a selection process for participating firms, as stated in the report. The ministry intends to expand the program if it demonstrates improved control over expenditure and measurable cost savings.