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, the ministry has received approval for the pilot under the 2026 regulatory sandbox initiative, allowing it to use digital currency for Treasury fund disbursements. The approved pilot will enable the use of tokenized deposits to cover business promotion expenses, which are currently processed using government-issued 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, government agencies will be allowed to test new methods outside the existing regulatory framework on a limited basis. Government officials anticipate that the new system will enhance oversight and transparency. Since token-based payments can be programmed with predefined conditions, such as spending limits and industry-specific usage, the need for manual audits is expected to decrease, particularly for transactions that occur outside regular working hours. By removing intermediaries like card networks, the ministry believes that transaction fees for small businesses receiving government payments could be significantly reduced. This is the second instance of deposit tokens being used in Treasury operations, following a previous pilot program 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. If the program demonstrates improved spending control and measurable cost savings, the ministry plans to expand it further.