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

The South Korean Ministry of Economy and Finance is set to initiate a trial of blockchain-based deposit tokens for government expenditure in the fourth quarter, as part of a larger effort to revamp the management of public funds. According to local reports, the ministry has received approval for a pilot program to utilize Treasury funds in the form of digital currency under the 2026 regulatory sandbox initiative. This approval enables the use of tokenized deposits to cover business promotion expenses, which are currently processed using government purchasing cards. The introduction of this new system marks a significant departure from the long-standing Treasury Funds Management Act, which previously mandated the use of card-based payments. Within the sandbox environment, agencies will be permitted to operate outside these constraints 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, including restrictions on when funds can be utilized and which industries are eligible to accept them. This could lead to a reduction in manual audits, particularly in instances where spending occurs outside standard hours. Furthermore, the system eliminates intermediaries such as card networks, which, according to the ministry, could result in lower transaction fees for small businesses receiving government payments. This initiative represents the second instance of deposit tokens being utilized in Treasury operations, following an earlier pilot project related to subsidies for electric vehicle-charging infrastructure. The trial is scheduled to take place in Sejong City, following a selection process for participating firms, as stated in the report. The ministry intends to expand the program if it demonstrates enhanced control over expenditure and yields measurable cost savings.