South Korea to Pilot Blockchain-Based Deposit 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 deposit tokens for government expenditure, as part of a broader effort to modernize public fund management. According to local media reports, the pilot program has been approved under the 2026 regulatory sandbox initiative, allowing for the use of digital currency to disburse Treasury funds. This move will enable the use of tokenized deposits to pay for business promotion expenses, which are currently processed using government purchasing cards. The introduction of token-based payments is expected to enhance oversight, as these payments can be programmed with predefined conditions such as spending limits and restrictions on eligible industries. This could lead to a reduction in manual audits, particularly for spending that occurs outside regular hours. Furthermore, the removal of intermediaries such as card networks is anticipated to lower transaction fees for small businesses receiving government payments. This pilot program marks the second instance of deposit tokens being used in Treasury operations, following an earlier trial related to subsidies for electric vehicle-charging infrastructure. The pilot is scheduled to take place in Sejong City, following a selection process for participating firms, with plans for expansion if the program demonstrates improved control over spending and significant cost savings.