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

In the fourth quarter, South Korea's Ministry of Economy and Finance is set to launch a pilot program for testing blockchain-based deposit tokens as a means of government spending, marking a significant step towards modernizing public fund management. According to local news outlets, the ministry has received approval for a pilot program to utilize Treasury funds in the form of digital currency under the 2026 regulatory sandbox initiative. The approved pilot will enable the use of tokenized deposits to cover business promotion expenses, which are currently processed using government purchasing cards. This shift deviates from the long-standing system governed by the Treasury Funds Management Act, which previously mandated card-based payments. Within the sandbox environment, government agencies will be allowed to operate outside these rules on a limited basis to test innovative approaches. Officials anticipate that this change will lead to enhanced oversight, as token-based payments can be programmed with predefined conditions such as spending limits and industry-specific acceptance criteria. This could lead to a reduction in manual audits, particularly for spending that occurs outside regular hours. Furthermore, the system eliminates intermediaries like 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 program 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 enhanced control over spending and yields measurable cost savings.