South Korea to Introduce Blockchain-Based Tokens for Government Expenditure

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 tokens for government expenditure as part of a broader effort to modernize public fund management. According to local reports, the ministry has received approval for the pilot under the 2026 regulatory sandbox program, allowing it to use digital currency to spend Treasury funds. The approval enables the use of tokenized deposits to pay business promotion expenses, which are currently processed using government purchasing cards. This move marks a significant shift from the traditional system governed by the Treasury Funds Management Act, which required card-based payments. In the sandbox environment, agencies will be able to test new methods outside of the existing rules on a limited basis. Officials anticipate that this change will enhance oversight, as token-based payments can be programmed with predefined conditions such as spending limits and industry restrictions. This could minimize the need for manual audits, particularly when spending occurs outside regular hours. The new system also eliminates intermediaries like card networks, which the ministry believes could lead to lower transaction fees for small businesses receiving government payments. This is the second instance of using deposit tokens in Treasury operations, following an earlier pilot 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, with plans to expand the program if it demonstrates improved control over spending and significant cost savings.