South Korea to Introduce Blockchain-Based 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 tokens for government expenditure as part of a broader effort to modernize public fund management. According to local media reports, the ministry has received approval for the pilot under a 2026 regulatory sandbox initiative, which will enable the use of digital currency to disburse Treasury funds. The approval will allow businesses to utilize tokenized deposits for promotional 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 permitted to operate outside these rules on a limited basis to test innovative approaches. 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 usage. This could minimize the need for manual audits, particularly when spending occurs outside regular hours. The new system also eliminates intermediaries like card networks, which the ministry believes could lead to lower transaction fees for small businesses receiving government payments. This is the second instance of using deposit tokens 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 yields stronger control over spending and measurable cost savings.