South Korea Set to Pilot Blockchain-Based Government Spending Tokens in Q4

The South Korean Ministry of Economy and Finance is scheduled to launch a pilot program in the fourth quarter, testing the use of blockchain-based deposit tokens for government expenditures as part of a broader initiative to modernize public fund management. According to local media reports, the ministry has obtained approval for the pilot under the 2026 regulatory sandbox program, allowing the use of digital currency for Treasury fund expenditures. This approval enables the use of tokenized deposits for business promotion expenses, which are currently processed using government purchasing cards. The introduction of token-based payments marks a significant shift from the traditional system governed by the Treasury Funds Management Act, which mandated the use of card-based payments. Within the sandbox environment, government agencies will be permitted to operate outside these rules on a limited basis to test innovative methods. Government officials anticipate that this change will enhance oversight, as token-based payments can be programmed with predefined conditions such as spending limits and industry-specific usage. This could lead to a reduction in manual audits, particularly when spending occurs outside regular hours. The new system also eliminates intermediaries like card networks, which, according to the ministry, could result in lower transaction fees for small businesses receiving government payments. This pilot program represents the second instance of deposit tokens being used in Treasury operations, following an earlier trial related to subsidies for electric vehicle-charging infrastructure. The trial is set to take place in Sejong City after a selection process for participating firms, as stated in the report. The ministry intends to expand the program if it demonstrates enhanced control over spending and measurable cost savings.