South Korea to Introduce Blockchain-Based Deposit 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 deposit tokens for government expenditure as part of a broader effort to modernize public fund management. According to local reports, the ministry has been granted approval under the 2026 regulatory sandbox program to conduct a trial using digital currency to disburse Treasury funds. The pilot program will enable the use of tokenized deposits to pay for business promotion expenses, which are currently processed using government purchasing cards. This change marks a significant shift from the traditional system governed by the Treasury Funds Management Act, which required the use of card-based payments. In the sandbox environment, government agencies will be allowed to operate outside these rules on a limited basis to test new payment methods. Officials anticipate that this change will enhance oversight, as token-based payments can be programmed with predefined conditions, including restrictions on when and how funds can be used, as well as which industries can accept them. This could significantly reduce the need for manual audits, particularly in cases where spending occurs outside standard hours. The new system also eliminates intermediaries such as card networks, which, according to the ministry, could lead to lower transaction fees for small businesses receiving government payments. This is the second instance of deposit tokens being used in Treasury operations, following an earlier 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, according to the report. The ministry plans to expand the program if it demonstrates improved control over expenditure and yields measurable cost savings.