South Korea to Introduce Blockchain-Based Deposit Tokens for Government Expenditure in Q4

As part of a larger effort to modernize public fund management, South Korea's Ministry of Economy and Finance is set to launch a trial of blockchain-based deposit tokens for government expenditure in the fourth quarter. According to local media, the ministry has obtained approval for a pilot program to utilize digital currency for Treasury fund expenditure under the 2026 regulatory sandbox initiative. This approval enables the use of tokenized deposits for business promotion expenses, which are currently processed using government purchasing cards. By transitioning away from the traditional card-based payment system governed by the Treasury Funds Management Act, the new approach introduces greater flexibility. Within the sandbox environment, agencies can test innovative methods on a limited scale, operating outside the constraints of existing rules. Government officials anticipate that this shift will enhance oversight capabilities. Since token-based payments can be pre-programmed with specific conditions, such as usage limits and industry restrictions, the need for manual audits is likely to decrease, particularly for expenditures occurring outside regular hours. Additionally, the removal of intermediaries like card networks may lead to lower transaction fees for small businesses receiving government payments, as stated by the ministry. This initiative marks the second instance of deposit tokens being utilized in Treasury operations, following a previous 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 reported. If the program demonstrates improved control over spending and yields measurable cost savings, the ministry plans to expand it.