South Korea to Introduce Blockchain-Based Deposit Tokens for Government 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 spending, 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, enabling the use of digital currency for Treasury fund expenditures. This will allow business promotion expenses, currently processed using government purchasing cards, to be paid using tokenized deposits, thereby altering the long-standing system governed by the Treasury Funds Management Act. By operating in a sandbox environment, agencies will be able to test new methods outside the existing rules on a limited basis. 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 industry-specific usage. This could lead to a reduction in manual audits, particularly for spending that occurs outside standard hours. Additionally, the removal of intermediaries like card networks is expected to 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 program 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, with plans to expand the program if it demonstrates improved control over spending and significant cost savings.