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

As part of its efforts to modernize public fund management, South Korea's 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. According to local media reports, the ministry has received approval for the pilot under the 2026 regulatory sandbox program, which will enable the use of digital currency to disburse Treasury funds. The pilot program will allow business promotion expenses, currently processed using government purchasing cards, to be paid using tokenized deposits, thus deviating from the traditional system governed by the Treasury Funds Management Act. In the sandbox environment, government agencies will be permitted to operate outside the existing rules on a limited basis to test new methods, with the expectation of improving oversight. Token-based payments offer the advantage of being programmable with predefined conditions, such as spending limits and eligible industries, which could lead to a reduction in manual audits, particularly in cases where spending occurs outside regular hours. Furthermore, the system eliminates intermediaries like card networks, which, according to the ministry, could result in 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 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 enhanced control over expenditure and measurable cost savings.