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 expenditure as part of a wider effort to modernize public fund management. According to local media reports, the ministry has obtained approval for the pilot under the 2026 regulatory sandbox program, which will enable the use of digital currency to disburse Treasury funds. The approval will facilitate the use of tokenized deposits to cover 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 mandated the use of card-based payments. In the sandbox environment, agencies will be allowed to operate outside these rules on a limited basis to test innovative approaches. Government officials anticipate that this change will enhance oversight, as token-based payments can be programmed with predefined conditions such as spending limits and restrictions on eligible industries. This could lead to a reduction in manual audits, particularly in cases where spending occurs outside regular hours. The new system also eliminates intermediaries like card networks, which could result in lower transaction fees for small businesses receiving government payments, according to the ministry. This is the second instance of deposit tokens being used 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 after a selection process for participating firms, as stated in the report. The ministry plans to expand the program if it yields stronger spending control and measurable cost savings.