South Korea to Pilot Blockchain-Based Tokens for Government Expenditure

In an effort to modernize public fund management, the South Korean Ministry of Economy and Finance is set to launch a pilot program in the fourth quarter, which will involve testing the use of blockchain-based deposit tokens for government spending. This initiative is part of a broader regulatory sandbox program approved for 2026, as reported by local media. The program will allow for the use of tokenized deposits to cover business promotion expenses, which are currently processed using government purchasing cards. By doing so, it will deviate from the traditional system governed by the Treasury Funds Management Act, which mandates card-based payments. Within the sandbox environment, government agencies will be permitted to operate outside these rules on a limited scale 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 restrictions on which industries can utilize them. This could lead to a reduction in manual audits, particularly when spending occurs outside regular hours. Furthermore, the system eliminates intermediaries like card networks, which, according to the ministry, may result in lower transaction fees for small businesses receiving government payments. This marks the second instance of deposit tokens being used in Treasury operations, following a previous pilot related to subsidies for electric vehicle-charging infrastructure. The trial is slated to take place in Sejong City after a selection process for participating firms, with plans to expand the program if it demonstrates improved control over spending and tangible cost savings.