Blockchain-Based Deposit Tokens to be Piloted for Government Expenditure in South Korea

In the fourth quarter, the South Korean Ministry of Economy and Finance is set to launch a pilot program for blockchain-based deposit tokens to be used for government spending, as part of a larger effort to modernize public fund management. According to local media, the ministry has been given the green light to test the use of digital currency for Treasury fund expenditure under a 2026 regulatory sandbox initiative. This pilot will enable the use of tokenized deposits for business promotion expenses, which are currently processed using government purchasing cards. By doing so, it will temporarily bypass the traditional system governed by the Treasury Funds Management Act, which previously mandated card-based payments. Within the sandbox environment, agencies will be allowed to test new methods outside of the existing regulations. 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 acceptance. This could minimize the need for manual audits, particularly for spending that occurs outside regular hours. Additionally, the removal of intermediaries like card networks may lead to lower transaction fees for small businesses receiving government payments. This marks 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, with plans to expand the program if it demonstrates improved control over spending and significant cost savings.