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 its efforts to modernize public fund management. According to local media reports, the ministry has received approval for the pilot under the 2026 regulatory sandbox program, which will enable the use of digital currency for Treasury fund expenditure. The approved pilot will allow for 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. Within the sandbox environment, government agencies will be able to operate outside these rules on a limited basis to test innovative methods. Officials anticipate that the new system will enhance oversight, as token-based payments can be programmed with predefined conditions, including spending limits and industry-specific acceptance criteria. This is expected to reduce the need for manual audits, particularly when spending occurs outside regular hours. Additionally, the system eliminates intermediaries such as card networks, which could lead to 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 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 demonstrates improved control over spending and yields measurable cost savings.