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 the 2026 regulatory sandbox program, which will enable the use of digital currency to disburse Treasury funds. The approved pilot will allow business promotion expenses, currently processed using government purchasing cards, to be paid using tokenized deposits, thus deviating from the long-standing system governed by the Treasury Funds Management Act that mandated card-based payments. In the sandbox environment, government agencies will be permitted to operate outside these rules on a limited basis to test innovative methods. Government 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 utilized, as well as which industries are eligible to receive them. This could reduce the need for manual audits, particularly when spending occurs outside standard working hours. The new system also eliminates intermediaries, such as card networks, which the ministry believes could lead to 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 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 measurable cost savings.