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 trial of blockchain-based deposit tokens for government expenditure in the fourth quarter, as part of a larger effort to modernize public fund management. According to local media reports, the ministry has received approval for a pilot program to utilize digital currency for Treasury fund expenditure under a 2026 regulatory sandbox initiative. This approval enables the use of tokenized deposits for business promotion expenses, which are currently processed using government purchasing cards. The introduction of this new system marks a significant departure from the traditional framework governed by the Treasury Funds Management Act, which previously required card-based transactions. Within the sandbox environment, government agencies will be allowed to operate outside these rules on a limited basis to test innovative methods. Government officials anticipate that this change will lead to enhanced oversight. Since token-based payments can be programmed with predefined conditions, including limitations on when and how funds can be utilized, as well as which industries can accept them, the need for manual audits, particularly outside standard working hours, is expected to decrease. Moreover, the removal of intermediaries such as card networks is predicted to lower transaction fees for small businesses receiving government payments, according to the ministry. This initiative represents the second instance of deposit tokens being used in Treasury operations, following an earlier pilot project related to subsidies for electric vehicle-charging infrastructure. The trial is scheduled to take place in Sejong City, following a selection process for participating firms, as stated in the report. The ministry plans to expand the program if it demonstrates enhanced control over expenditure and measurable cost savings.