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 a larger effort to modernize public fund management. According to local media reports, the ministry has obtained approval for the pilot under a 2026 regulatory sandbox initiative, which will enable the use of digital currency for Treasury fund expenditures. The approved pilot will allow business promotion expenses, currently processed using government purchasing cards, to be paid using tokenized deposits, thereby altering a long-standing system governed by the Treasury Funds Management Act. In the sandbox environment, government agencies will be permitted to operate outside the existing rules on a limited basis to test new approaches. Officials anticipate that this change will enhance oversight, as token-based payments can be programmed with predefined conditions, including spending limits and industry-specific acceptance criteria. This could reduce the need for manual audits, particularly when spending occurs outside regular hours. The system also eliminates intermediaries, such as card networks, which the ministry believes could lower transaction fees for small businesses receiving government payments. This marks 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, following a selection process for participating firms, with plans to expand the program if it demonstrates improved control over expenditure and measurable cost savings.