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

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 larger effort to modernize public fund management. According to local media reports, the ministry has received approval for the pilot under a 2026 regulatory sandbox program, which will allow the use of digital currency to disburse Treasury funds. The program will enable the use of tokenized deposits to pay for 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 previously required card-based payments. By operating in a 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-specific usage. This could lead to a reduction in manual audits, particularly for spending that occurs outside regular hours. Additionally, the system eliminates intermediaries such as card networks, which could result in lower transaction fees for small businesses receiving government payments. This is the second instance of deposit tokens being used in Treasury operations, following a previous 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, and the ministry plans to expand the program if it demonstrates improved control over spending and significant cost savings.